Financially free at 32 – My 10 year property journey

Spot on! You are funny....and make me laugh.
You do make an effort in every discussion you make.
Dziekuje!

 

Zapraszamy

 

How would a strategy like this be holding up in today’s climate with dividend reductions and rent possibly following?

 

Recent rate cuts will certainly add to cash flow and reduce the holding cost pressures that come with larger portfolio's ... as long as tenants stay in place and keep paying . But what everyone should remember is that BUYING a lot of properties is not the same as OWNING a lot of properties. Until debt is retired, there is rarely ( if ever) enough surplus income to live off.... even 20 or 30 years later. If there was, we would have generations living off rents now. Do we? No.

Make no mistake - all these young guns who accumulate rapidly are still working in order to HOLD what the bank still owns.... Unless they win the lottery. Don't let them tell you otherwise. They are not financially free. They are on their way there, but the departure gate ain't the arrivals gate.

It's why I prefer cash cows such as regional Dual Occ's. At today's rates, they produce @15K if you use IO, or @5K if you use P&I. So you can hold several of them, pay little or no land tax, never face P&I holding pressures, pay down debt as you go, add to your portfolio later as your borrowing capacity is restored, and no matter what happens to asset values ( up, down, sideways) you end up debt free and cash flow rich- with unencumbered assets and strong incomes in retirement... all achieved without the need for growth and without having to sell things off to make it happen...

 

Just reading this thread again. With the COVID19 situation, if one loses his income, it would be very worrying. If the property prices dropped and tenants failed to pay up, it would be even more stressful.

I just wish everyone on PC is doing OK with their investments. As of today, there will be relatively few people who are not financially affected the virus. Take care and stay safe.

 

Please excuse my question.how is debt recycling done. i am trying to correct my strategy which has been bogged down by a very bad property (IP3 below, it was bought for 440 +costs in 2010) and a mess of a divorce more than a decade ago which derailed my plans years ago. Mentally ok now, but lost steam a bit, need advice from guys like you.

1. PPOR : Value 1200K (Large House) : -($565K Loan)
2. IP1 : Value 1100K (Large House) : -($740K Loan)
3. IP2 : Value 400 to 450K 2 bedder in dandenong areas:-($210K Loan)
4. IP3 : Value 520-560K : (2 bedder in St Kilda east):- (420K Loan)

This was refinanced new in 2019 as until then i was mentally bogged down due to depression and lack of self esteem, and had loans with westpac that had been interest only for 10 years.
The offsets have :-
1. 25K (buffer) (this hovers from 25K to 35K each month as its the account from which the repayments are done and where the rents and my salary goes in.
2. 50K (interest only for 1 year then P+I
3. 10K (interest only)
4. 35K (re-draw account - i've accounted for this in the debt above already) but havent used it yet
My income current is 100K per year, unfortunately i had a 30K income reduction due to redundancy in 2019 and 5 months to get re-employed. It used to be 130K p.a. I can probably get that income back by the mid of 2021. The redundancy money got all spent in the repayments for the 5 months that i was unable to get employed. Buffer 1 was at 50K when i was made redundant however it went down to this number due to 5 months unemployment streak and a unforseen repairs in car. I've had a another unemployment run in 2013 which lasted 8 months thus decimating 60K from my buffers back then.

Ive had the props for about 10 years or more. i did not buy anything after 2010. IP3 was a great big mistake that costa a lot to run and does not grow well.

All in all about 220K has been decimated from buffers (between 2010 to 2019) getting over depression and 2 unemployment bouts over my entire career. i am in my 40s now. of that 90K was spent due to not having salary and shortfalls chewing it up. the other 130K was spent due to just losing control mentally due to lifes setbacks. Now i would like to restart, but i am a bit lost with ideas. Whenver i analyse development projects (2 townhouse type) and run modelling on it, i cannot see profit.

 

It's never as bad as it seems ,from reading this apart from the normal bumps in the road that come with any risk investment I think you have done quite well.
Well done with dealing with depression as there may not be a clear definition for it,but you can recognise it when you see it.good luck..

 

When the Government interferes with the market ie tenancy laws ,superannuation you can be rest assured it is not good for investors case in point changes that took place after COVID19. Two years of Cash to cover any black swan events is the recommendation.Interest rates are the lowest its been but, the consequences of not doing that are worse

 

@Jack Chen I only just found your post from years ago and it has been a massive inspiration. Thank you so much for sharing your story in such a detailed way and I have learned so much from it as a beginner.

 

Wonderful

I would be curious on value of portfolio today

 

My guess is closing in on 10m.

 

You can now buy the whole bloody plantation.

 

Property prices only starting to retrace their previous peak in 2017 so not quite

Even so, I'd still choose to have my regular serving of oatmeal, fresh fruits and homemade coffee.

 

Wonderful story, well done. Yep, property is the bet "get rich slow" scheme around.

 

Thanks Frank22. Can you unpack this? Are you saying that new tenancy laws mean that you can be stuck with a bad tenant and a non-income producing property in this environment?

 

@Jack Chen you mentioned you had $600k share portfolio in your original post, that’s so impressive!

Can I ask, did you start investing in shares very early, did you start with a very sizeable investment eg: $100k plus, do you regularly put more money in and/or do lump sum buys in dips?

I’m trying to gauge what it takes to build towards that …

Completely appreciate everyone has different circumstances and approaches, and past performance in market doesn’t mean anything for the future.

Are you enjoying your early retirement? I’m very envious

 

Started small, like $5k purchases until I got comfortable with the process and learnt to ignore the price fluctuations and stopped reading the news. Then starting pulling equity from property to make bigger purchases.

Both; during dips I might put in a bit more, as I can't resist a bargain, but consistency is more important in the grand scheme of things.

 

So would you know roughly what gains as a % are directly from share investments as opposed funds deposited like from property sells?

 

No such thing as luck in this game, so congratulations! It's a hard slog and takes ALOT of sacrifices to save and get into property let alone hold onto it for ages to accumulate the CG compounding effects and riding the highs and riding out the lows. If I may share, for my wife and I (now in our early and mid 40's now), we were disciplined enough to invest early (in our 20's). We had no inheritance or family support, starting from a zero cash balance, my wife and I struggled together for a while (we were once homeless in our late 20's)... but we always knew we had to work hard (at least initially), save and invest to get ahead. Fast forward 20+ years later, and with making mistakes along the way, we have paid off our PPOR now worth $2.5M+ about 5-6 years ago. It's true that owning your own home, mortgage free is like a shadow lifted from your soul. We originally bought and lived in our small modest unit for many years (we needed to start somewhere in property) but once we had kids, we needed space and eyed off a fibro dump (that was originally on our land now). Afterwards, we were able to knock down/rebuild our dream home in a lovely suburb approx. 10km from Sydney CBD). Over two decades, we had also accumulated a sizeable IP portfolio worth around $4.3M+ all generating a nice positive cash flow and had excellent CG. We are by no means "CEOs" or anything like that, but worked hard and scrimped and saved, often eating soggy sandwich lunches daily for years (LOL), forgone luxury holidays and sports cars all our "friends" had. That was our sacrifice. We are also managing to raise 2 young children with non-existent family support but are able to provide them good education and schooling. My wife lost her job during Covid (like many people) and whilst it sucked, we felt financially safe (saving for a rainy day pays off!). Also, I was still working. My wife decided to do a career change and is reskilling as a result and will take a couple of years "downtime". We decided to sell one IP in Sydney to be safe with our cashflow during these uncertain times (in a pandemic and with one less one income) but we felt better knowing we could sleep at night whilst some big changes were happening in our lives. With young kids, it's nice knowing we have ready access to a very healthy cash buffer ($1M+ cash). This would cover raising kids, schooling, and anything else that may pop up. I would say our story is a sort of rags to riches story, the aim here is not to boast but share that financial mental freedom can truly happen with the right determined mindset and hard work. Aside from our home comforts, we still lively humbly and I still probably work too hard (maybe I will ease up within the next 5 years because I don't think I want to report to anyone anymore). We still shop at Aldi and KMart, drive a little hatchback around and always look for specials and simply don't buy crap we don't need. Our kids PJs and shoes have holes in them - and they won't get new ones until they completely wear out. We have never felt the need to "keep up with the Jone's" because we don't care about the Jone's. What many people show on the exterior usually hides a false inside anyway. Sadly, determination to invest for the long term is lacking in many people nowadays, many they want instant wealth without doing the real "hard yards". Good luck to all.