is there anyone actually living off their equity and maintain a buffer as well to pay for any shortfalls on their IP?
i've recently met 2 people who advise me of this strategy.
Living off equity and borrow the life style cost against property is very risky.
I think this idea is just for those people try to sell off their property and paint a pretty picture for some naive people.how can people keep borrowing and increase debt; even asset appreciate it is still very scary…..
any comment
it doesnt make sense to me borrowing to cover debt but these people are actually teaching their clients to do just that. and yes, 1 is trying to sell me my first 2 properties worth over $1.15m.
is it still difficult to find a positive cash flow property in the current market?
jacpru wrote:it doesnt make sense to me borrowing to cover debtIt makes sense when it means you can keep an asset(s) that will grow in the medium/long term at a much higher rate than the cost to maintain. Also means you never have to pay CGT!
The risk is starting it too early at a point where you need property to be going up by 10% every year for it to work.
If you have a 5-7 year buffer with a diverse property portfolio the risk is minimal.
im not a fan of negative gearing. it sounds really good when there is no cash outlay on my side when it's negatively geared but i dont think 10% yearly increase is sustainable.
1 of the selling point is i have a 7 year buffer.
i still think postive gearing makes more sense that's why im trying to learn steve's principle.
i wonder if everyone here are just buying positively geared IP???
Yeah I heard this argument for living off equity. I wonder how many got caught out in the gfc. It does sound a bit risky for me. But I guess if you have 100 properties or something then you can do it. I like the no GCT part. I've got + and – ips. I think as long as your ip portfolio is doing what you want then doesn't matter. Some people really like paying stacks of money out of their paycheck every week!
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email Mewhen you draw down equity to live off the additional borrowings are not tax deductible against your income. Your position continues to get worse over time. There are also no gurarantees that property prices will continue to increase from the very high levels they are at today.
Living off equity is a great strategy. Borrowing for living expenses is not deductible, but things can be structured so that you are borrowing to pay loans and then living on rents, so it can be deductible. The trouble is not bank will likely lend to you these days unless you have a good reason for needing the money. Borrowing to pay interest or for living expenses are no longer good reasons.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
thanks all. i dun think i'll use that strategy.
im just starting out and still doing some readings on how to get started.
anyone join the 250k club???
jacpru wrote:thanks all. i dun think i'll use that strategy.im just starting out and still doing some readings on how to get started.
anyone join the 250k club???
yeah i joined it when he was here in syd a few days ago for his new book launch. See how i go applying his principals.
Only thing that i have found i could be doing wrong is relying too much on negative gearing. While i should be trying to turn the IP properties into positive.
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