Financially free at 32 – My 10 year property journey

If you liquidated all your IP's you would be up for a hefty CGT bill. I know you will get 50% discount but sometimes I think the equity equation needs to be adjusted a little or thought of differently. I've been working on my will/insurance lately and most likely IP loans will need to be paid out with life insurance or sold as if I am no longer around the incomes not there and bank will clearly not lend to my beneficiaries that don't have incomes (banks don't really care about LVRs anymore)`

 

Great story Jack but I think I'd be worried about seeing the share price fluctuate too much. Sorry if I missed it but is your 600k invested directly into shares or have you bought LICs? This seems to be a forum favourite strategy.

I feel the same, it's a big chunk of capital which can easily go down more than property.

Are you saying the Peter Thornhill strategy is better than using property to live off rent?

 

I think:
1. You should go to a Peter Thornhill talk...
2. You should read the threads on "Property is better than Shares" and "Shares are better than Property"

 

You noted this was in 2013 ( Pre APRA). Given how reliant equity harvesting is on borrowing capacity, is this still working for you post APRA , or are you finding it more difficult to extract equity because of borrowing capacity constraints?

You noted this was in 2014 ( Pre APRA) and it is also reliant on equity harvesting and borrowing capacity... so as above, Im wondering whether it is still working for you? ie are you able to continue to extract equity and debt recycle with the same effectiveness as you were able to pre APRA? Or have changes to assessment rates disrupted this model/stopped this model from working as effectively for you?

This may answer my questions... if I am reading this correctly you came to a point where cash flow for debt reduction became essential to the longer term outcomes you want?



More broadly what I'm asking is - if you had not embraced debt reduction , pursued growth instead, and not started paying down debt, would you find your borrowing capacity and holding capacity under more stress? Or worse, would you actually be able to hold without tipping quite a lot of your own coin in..?

If you were starting today, would you have been able to accumulate the 10 properties using post APRA servicing calculators without considering cash flow, or would have needed to inject cash flow/debt reduction far sooner in order to do so?

Would you consider that you are truly financially free, or do you need income in order to sustain your portfolio? I ask because I note you have commenced self employment as a broker...

 

It's land that appreciates, so definitely if you have the resources to purchase houses/townhouses then prioritise those to maximise land content and to maximise value add potential.

My strategy was to get as close to Sydney CBD as possible, so my only option was flats. Walk up flats with 12 or less units still have a decent amount of land content, so it's still a viable strategy for cities like Sydney.

 

Couldn't have put it better myself.

My strategy was to get as close to Sydney CBD as possible with yields of 6%+, this lead me to units along the rail corridors with 20-30 minute commutes to the city.

However, with the benefit of hindsight, I would've also bought some houses in Western Sydney prior to the boom, as houses performed slightly better than units over the course of the Sydney boom.

 

You got into a rising market and maximised the opportunity by leveraging......that is the main thing... rise and repeat

 

Yes you're absolutely right, definitely something to consider. For simplicity I haven't modelled out CGT as I don't have any immediate plans to sell.

Mostly LICs and ETFs, some direct shares. Life is too short to be pouring over the AFR everyday so I quite happily outsource portfolio management to the professionals in exchange for 0.11%~0.16% in management fees.

Shares are a completely different asset class that requires a different mindset. Highly recommend Peter Thornhill's Motivated Money if you want to learn more about investing in shares for the long term (same mindset I use for property).

Depends on what your goals are. But for me shares for a retirement income stream is way more effective than property.

Property for me is a means to an end: To grow capital first.

 

Just came across this blog post courtesy of @Snowball

"One of the best cashflow generators in Australia is dividend-paying shares, due to strong yields and franking credits. Put another way, to retire on your residential properties, you’re going to need a far higher net worth than if that equity is invested in diversified Aussie shares like LICs."
Source: Our Adventures with Leveraged Property - Strong Money Australia

 

Is it this book?

Welcome - Motivated Money

I think I'll buy it and expand my thinking to putting large sums of money (50-70% Of total assets) into the sharemarket but I still think the risk is greater than holding most of one's assets in property..

 

It's a good book. Very easy to read. But like all other authors trying to drive home "their" idea, it's all about shares. Each to their own. I got a lot out of it when I was contemplating borrowing to invest in shares.
As for risk, he highlights his risks against property pretty well. Just like anyone else spruiking property will say that shares are risky.

Have a read through both of these threads
Why Property is Better Than Shares
Why Shares are Better Than Property
They seem lengthy, but shouldn't take long to read. You'll get a lot of discussion about both sides of the argument. At the end of the day it's all about diversification and your interpretation of risk.

 

Hi @Jack Chen - your story is an inspiration to re-read after we chatted. I love how you achieved so much in such a short period of time by staying focused.

Thank you Jack for being a great inspiration to all of us.

 

Thanks for sharing your story @Jack Chen, definitely inspiring to see the thought, strategy and overall thought process behind the success.

I have ran the rough numbers for my own situation but have always wanted to pick the brains of those who are where I aim to be:

Knowing what you know now - particularly when it comes to LIC’s/ETF’s - would you go through the same process or would your strategy be more LIC/ETF focused all the way? Taking all factors in to play, such as time to get to where you are, holding/ongoing costs, SANF and ongoing effort/research?

 

Strategy-wise no change. I still am a firm believer in property to grow capital first. You can't save yourself to wealth (if following a pure LIC/ETF accumulation path), unless your expectations are modest.

But knowing what I know now, and if I could rewind the clock, I would've read the signs that Sydney was on the cusp of a boom, and would've taken advantage of the easier lending environment back then to turbo charge my wealth creation. Saving 20% deposits each time was way too conservative now that I think about it.

 

Hi @Jack Chen - I tried finding what the abbreviated terms for this: LIC/ETF and I couldn't find it in the thread. What do they mean?

Thanks,

 

Listed investment company
Listed investment companies (LICs) | ASIC's MoneySmart

Exchange traded fund
Exchange traded funds (ETFs) | ASIC's MoneySmart

Do a google search "LICs versus ETFs". There's many articles written on this. It's not a simple choice.

 

Amazing achievement. Very inspirational and thanks for sharing.

 

Collecting properties like postage stamps. For real?

 

Lonely Journey is the truth... everyone's holding their cards very close. Hope to meet more like minded people here and continue the journey.

 

Guys, just to clarify again...if

• I have no job and no business income,
• I invest $100K in say, Argo (ARG)
• Its returning 4% fully franked dividends

At the end of the year, do I receive $4K in dividends (cash) or $5.7K?