Grow Capital First

Existing investors probably are, but I mean for your typical "middle class" investor just starting out, I don't think banks are as keen anymore to let you leverage up into the millions in a short period of time. Which means more time in the market is probably going to be needed.

 

So serviceability knocked them back to reality. Cheers

 

Not necessarily, if you time the market you can move faster, for example we have had 3 property booms in Australia since 2013, if investors focused on these markets and levered then they could have made a killing, even if just starting out.
I know someone on SS/PC who started in 2013 and had made his first million $ net, not equity, as he played in booming markets, pulled the pin and continued to play in the markets that were booming.

All to their own.

 

Barny, this is probably a well worn path for a number of investors and speculators in all sorts of markets ...

The only thing you will find at the bottom of the till, when you run out of cash, (and no more can be sourced from others), is:-

the bottom of the till... and this is less than ideal.

 

bump

For those following th thread cashflow vs capital, may be worth reading first post on this... (original article).

you actually need to build capital to create passive income try doing it the other way around, you will get stuck. There are easy ways to achieve this as outlined in first post here.

 

Before APRA, definitely CG focus is better. After, you definitely need to focus on cash flow too. Unless your income is huge but if it is, you can focus on whatever you want

 

you need both, but without building capital first your cashflow will be limited, does this make sense, read first post

 

Definitely need a combination of both as a portfolio needs to be balanced in both or otherwise you will hit a road block. Getting the balance right is probably is the key to moving forward as it is the portfolio as a whole that is assessed with each additional loan

 

Out of curiosity, does anyone ever give much thought to how particular lenders might act in a credit crunch like the GFC?
Obviously more relevant if you are trying to borrow/grow aggressively. I just get concerned how very small institutions or small arms of foreign banks might act. Are you wary about small/unknown institutions or the source doesn't bother you?
Would you or have you ever given up a slightly better deal to go with a more established lender?

Anyone ever faced an issue or know someone that has on the residential side?

 

I'd be far more worried about foreign banks than local non banks. We have been through this in 09/10 through to 11/12 , when the AOFM stepped in as a cornerstone investor for multiple Australian lenders when securitisation markets closed. They have since sold out of most the RMBS they bought, and got their money back ( or better )

But with banks being forced to move RMBS bonds to 12 month terms by 2018, it's unlikely a GFC 2.0 would cuase a credit crunch in the same way it did last time, when the majority of lenders were buying the money they use for funding mortgages ( RMBS) on 90 and 180 day terms.

What mortgage debt they bought - who they bought from and what price they paid is all attached here

 

I was able to keep buying for a while without extracting equity. Now servicing is the bottleneck. Capital can always be saved.

 

I went for the longer exit
I thought $100k passive income would be enough after 10 years
On paper you feel $100k is enough but it is not really enough as you have tax , principal repayments , major repairs, vacancies interest rate rises etc
Also the risk of leaving a job and if you make a mistake in the investment you may not be able to get a well paid job again
Ended up leaving at the $500k passive income ...

 

I agree $100K is not enough, for our lifestyle we need $200K+, but I like the idea $500K, and currently working hard on this one

Would love to hear your story and how you achieved an amazing outcome, my guess is possibly a mix of resi/commercial and other asset classes??

MTR

 

I would be more than happy with $100k if I didn't have to go to work again.
It would be tough, but I'm sure I could make it work.

 

$100k gross would be quite a modest lifestyle. Just paying utilities and buying groceries would eat most of it, unless you spent your day shopping for the rates/groceries.

 

Not really... if you have your PPOR paid off. It will be modest I agree but what you are saying is frugal.

 

I worry very little about who I borrow from. I worry much more about who I lend to, and what I do with any money I have borrowed.

 

Beano in my mind passive income is an amount after all investment related costs. So in your 100k example if for example your investment related costs were 30k then the passive income would be 70k. That's how I would measure it anyhow.

500k pa is a decent amount if it's truely passive (ie net after all costs). If you are at that level congrats

 

Haha I am. Even if you lived frugally, but assuming you still bought car/health insurance and have a functional Internet and mobile phone - it's probably not uncommon to spend $1k+ a week as a household.

 

I think I could live on $100K Cash-flow per year (pre-tax, and of course this would need to exponentially grow, year-after-year, in line with inflation of course!), IF, I had a few hundred K of cash reserves in my offset accounts already.

That way I'd have the confidence of a rainy-day fund. In the first couple of years after exiting the full-time workforce I'd be super-frugal on that $100K Pre-tax income, and save as much of it as I could into the offsets. I might even still work part-time in these years or look at alternate sources of incremental revenue whilst I transition.

By year #3 of having exited the workforce I'd probably be able to relax a bit more, take a couple of holidays etc.

In my mind though, my aim is to be full-time work-force exited by 40 (6 years from now). At that age I'll still be young enough and able-bodied enough to re-invest those 40 hours per week into renovation and income-improvement strategies across my existing portfolio. This could be quite fun actually... considering my portfolio will be quite state-diverse by that point, I could travel for 3 months at a time and renovate/improve properties in different areas during the weekdays (at my own pace/leisure) and enjoy the weekends for local travel in/near these areas around the country!