Has anyone paid off their ips and used the snow ball effect ?

It's much easier to pay off properties at a later date after taking advantage of leverage to build a large portfolio with the equity monster growing over the many years. Then come time to consolidate you can pay down your portfolio to greatly increase your net cash flows. But it all depends on how much equity you have built up over the years.

Trying to buy ips and pay them off 1 by 1 with income will take forever and is not pragmatic imo unless your income is hundreds of thousands each year that you can put towards the loans . Very unlikely. The reality is you need to build up alot of equity for good cashflow later on, especially if you want 100k plus net cash flow.

Equity is king when building the machine. It's offspring is cashflow.

 

I don't know about the snow ball effect in Australia, a tough gig, but if you purchased in USA in 2011 you could have purchased properties at $35K (due to 70% market crash) and own them outright we are now onto 14 fully owned, generating around $200K pa.

 

Yeah... and I just remembered... the reason why some of mine are negative is because I pulled out equity to buy again.... on purchase price and on original debt I'm sure they'd be positive. But why would I want to do that (I.e. Stick to my original debt or even shrink that debt) over having extra ips?

 

Well sounds like youre growing your base so you have more assets growing for you. So while you dont have the cashflow now your base is expanding and hopefully will grow over time to give you greater cashflow options a little later.

 

I haven't personally used this method, but have read of people who have. There was an author named Anita Bell who wrote books advocating this method.

Initially, it would take some time to build up momentum and you'd be taxed fairly highly along the way.

 

From the American Christian finance guy Dave Ramsay I believe

 

For the sale of clarity.... It was a rhetorical question in my part

 

I'd stick to paying down PPOR and non deductible debt first before touching IP debt. As others have stated having a larger asset base that you can later sell down or draw equity from would be more beneficial than long term debt reduction.

Very impressive!

 

This strategy might have been good when interest rates were high

 

Like others, I would pay off PPOR debt first.

I would be hesitant about paying off IP debt. I would rather have fully drawn IO loans with offset accounts and over time 'fully chock' the offsets with my 'hard earned' cash (pay, rent, dividends, lotto winnings, casino winnings, track winnings, etc) rather than pay down IP debt.

In this way, I can take funds out of any offset for any purpose and the interest is tax deductible. This is way more flexible and I don't need the bank permission to get my hands on the money.

Also, I can somewhat manipulate my taxable income.

 

Shows how much times have changed over the last twenty years or so. I threw away - not gave away - one of her books just last week because it wouldn't be useful now. Apart from anything else, banks and loans have changed a lot. Eviction and foreclosure are scrutinised now. Offsets have made a huge difference.

 

No wonder you can afford a new outfit every day

 

LOL
I am seriously low maitenance

 

I know how expensive those black stockings can be.

 

Isn't the advantage increased borrowingpower as a result of finalising loans?

 

It's a great psychological strategy for getting on top of 'bad' debt. If you have a couple of credit cards personal and car loans disregard the interest rate and 'attack' the debt with the lowest balance forst, then redirect that extra (and the minimum payment not required for the paid off loan now) onto the next lowest balance etc.

John burley is the finance author/speaker I learned this from. Also a big proponent of saving 10% of your income which got me started investing almost 20 years ago now.

 

I never mentioned how much i will be putting in them but i will tell you now
6000k a month on one ip at a time snowball style , figure that out for me how long it would take

U wouldn't be doing this method if i was wanting to go slow , this is going to be a really aggressive form of pay down , ball to the wall every cent ive got

 

Interesting is she on this forum property chat?
If you do find out let me know im interested to find out
Also i like that method im thinking the same thing , execpt im going to put the deposits on first (so the houses arent to expensive in the future)

 

How did you get to the position of owning 14 ? What method did you use ? Also are these 14 in USA ? or both here is aus and usa

 

Yes im planning on paying them off through off set loans not pni