VIC $4million cash, 40, single [plan needed]

Its more so you will learn more from people who have already experienced what you are now experiencing. You'd rather learn to swim from someone who has swam before, right? You'd rather ask your friends who renovated for renovation advice before renovating, right?

You'd surely rather ask people who have tried to figure out where to park $4m in cash before what their advice is as well..

 

Still an interesting thought experiment as everyone throws around their thoughts.. Real story or otherwise.

 

If it were me I would live of the interest and give my time to helping those that need it.

 

What would I do? Spread across equities with some defensive blue chip property on low cheap leverage and a similar small mix in private equity. That'd give a 6-7%+ gross yield with the net being not far off with the franking credits added into the mix. Certainly wouldn't structure a portfolio to live off rents - the great thing about property is the ease of leverage and capital growth - if cash flow is the goal then there are simpler vehicles with higher returns.

 

Love your answer, simple and very mathematical. Commercial property or high yielding shares. Residential property investment usually has its perks in leverage and CG.

 

Bang most of it into low cost passive index matching funds (see Vanguard funds, read a Random Walk Down Wall Street). Balance it with some cash/some bonds/commodities etc. based on your preferences.

At a SWR of 4% on $4M, you wold have a gross income of $160k without the bother of tenants/renovations/property management.

The only reason I choose property as my vehicle is because I am poor (relatively speaking) and I can use leverage to amplify growth. If I was already wealthy (e.g. very high income or large capital base), then I would be following the advice of the Burton Malkiels/John Bogles/Warren Buffetts of this world and go the low cost passive index fund option (which has the best risk adjusted return because it's such low cost and such high diversification).

 

Thanks for taking the time to read the thread. Don't blame you for being a sceptic but I'll try and respond if it helps.

• 4 million cash - a round number but not far off.
• 'had experience in real estate'. Why has he come to this forum? - one small development and one PPOR - both riddled with mistakes. I am no property guru.
• 'made 2,000,000 in after hours work'. Hmmm!! - Yes my friends thought it was a great story. The tax department found it a great story too.
• Made 200,000 a year. How does he find time for after hours work? - I'm guessing you have a wife and kids?
• Seems to have made a lot of mistakes in his investing but still got 4 million cash. ? Well I've done somethings right. But I had $2m back in 2007 before an enormous property boom and have had to work extremely hard to double it - if I had invested it wisely I could have sat on a beach and done better.

 

.... Sounds like you have no idea what you are doing Joking of course, keep doing what you are doing you doubled your $2M, rinse and repeat.

 

Thank you, all. I am gaining some great insights from this thread. Here is what I am thinking about so far:

1. With a capital base that will exceed your income needs - think more broadly than just a financial plan. What is the purpose and goals for other areas of life? What will motivate you to get up in the morning? If you have always focused on making the next dollar, how to pivot? Does one simply consume goods and services at a higher rate and keep focusing on money?
2. To generate an income stream, there is no single method that works best.
3. Structuring is important
4. Super should be considered as a vehicle including property within super. Rules are changing.
5. Leverage may be OK, with suggestions of an LVR of somewhere between 0 and 50%. (No suggestions of higher leverage were made)
6. The KISS approach would be to use a hands-off product - ETF/LIC/managed fund.
7. For a hands-on approach direct investment in commercial property has merits
8. Residential property might not be the right vehicle (time, headaches, leverage, maintenance)

 

Well, almost no-one

 

I like this.

Will add look at ways of upskilling, developing property is a good way to generate capital/income.
Perhaps not in the two major cities at the moment as I think its not making too much sense as land has increased significantly.

Diversify with property in markets across Australia, not just one State, this way you have the benefit of capturing growth. You don't necessarily have to hold every resi property you buy, look at ways of flipping some to reduce debt increase cash flow.

MTR

 

Get a cast iron pre nup
Get a perpetual will
From that point on.....
I'd toss a coin everymorning to decide what to do

(Growing wealth for some is all consuming, enough is never enough)

 

Doubling $2m to $4m in 10 years isn't amazing but it's not terrible either!

You have seen lots of ideas so far. From this you can see there is no "right" answer. It depends on what you are interested in personally. Personally, I love improving amd developing property, so I would do that. Others are interested in CIP, so they would pursue that. Others aren't interested, so they would go passive and invest in ETFs and LICs. If you want to, you could do all three. It's really up to you at this point.

What has taken your interest so far?

 

I would probably buy at least one property, move in and establish it as the main residence, and then move out again. This could be done with cash or by borrowing 80%. if you are likely to live in it again in the future then pay down the loan and reborrow to invest in other income producing assets.

This way you get one CGT asset, tax effective if you move back in, and you still get access to the funds to invest as you please (less 25% tied up).

 

Hi

With $4m in cash the first thing you need to do is look at protecting your asset and whatever decision you make, make sure you are not adding any extra element of risk to the equation.

If it were me I would spread my risk by purchasing quality real estate, let's say two or three commercial properties and a cheaper residential property. Lock these properties away and put them behind you and never touch them, you can then do whatever you want to your hearts content from this point on with your new annual income from the rent that you earn.

You will easily meet your target income plus have plenty spare to start a business up, do some investing in other asset classes such as shares or wait a couple of years and buy another property with cash,again without any finance whatsoever and further add to your income levels.

Don't risk what you already have because it would be silly risking money that you got today for money that you don't need and this does not make sense to me,

Look at ways of spending the income you receive from your newly acquired assets once you have purchased them and if you can convince yourself to do that you will never go backwards from this day on-wards and will be able to sleep easy every night.

Regards,

alicudi

 

No such thing as cast iron pre nup, choose wisely, could be the best thing you do
Divorce is a killer

 

This is where Swiss banks and cayman banks are lifesavers...

 

Absolutely, but it may also erode wealth