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

Discussion in 'Investment Strategy' started by Drunkanbarbarian, 18th Oct, 2016.

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  1. kierank

    kierank Well-Known Member

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    I think you confuse people when you said you were paying the loans off.

    If you are going to use offsets, the loan is not paid off.
     
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  2. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    True that and its currently limited to ten years, you can however refinance to another bank and reset the clock, serviceability permitting.

    A contributor to your success no doubt.

    If Im reading it right thats the best way. Maximum control of cash flow, just takes a subtle shift in thinking for some.
     
  3. Blueskies

    Blueskies Well-Known Member

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    Back of the napkin calculation:

    4 IPs at 350k plus stamp duty, legals, LMI etc lets say ~1.5M
    Flat rate of principle being paid down of $6k per month
    Assuming this stays consistent and that your properties are neutral with rent covering all interest and expenses for the duration the timeframe would be 21 years.
     
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  4. dabbler

    dabbler Well-Known Member

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    6000k a month = all owned pretty quickly.
     
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  5. MTR

    MTR Well-Known Member

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    Cash funds, purchased in 2011/12.
    Most recent - Using funds/profits from development projects in Australia
    We just sourced US bank finance at 4.3%, difficult to do this as a foreigner, now we can leverage. I expect moving forward I will be using a number of strategies and selling old perhaps and buying newer product.
     
    Last edited: 19th Oct, 2016
  6. Sackie

    Sackie Well-Known Member

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    If you're looking for another partner to join the US team, where do I fill out the application form? :D
     
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  7. Barny

    Barny Well-Known Member

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    If you bought all 4 IP at a total of 1.5million.
    Interest only is $5000 per month @4%.
    Let's say the properties are generating enough cash to be neutral, so rents cover all expenses of 5k per month.
    Now you have 6k you can pay per month.
    If you pay 6k per month and continue this path it will take 15 years and 2 months to pay off.
     
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  8. Barny

    Barny Well-Known Member

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    Forgot to add. In years going forth rents should hopefully go up, if you recycle these rent increases straight back into the loan then you can knock off extra time paying it all back.
    Say in 10 years time all 4 properties have increased $25 per week, X 4 = 100 per week, 5200 per year.
    But in saying that, worst case, rents can go the other way too meaning you owe more in holding costs and it increases your time to pay off the loan.

    Leverage is fantastic. Just find a level of debt you're comfortable with.
     
    Last edited: 19th Oct, 2016
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  9. D.T.

    D.T. Specialist Property Manager Business Member

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    I think you're better off selling some after getting capital growth and using the proceeds to pay off debts on others. Capital growth runs at a far higher rate than anyone can possibly pay themselves.
     
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  10. The Y-man

    The Y-man Moderator Staff Member

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    Basically how we did it - sold a few (ok more than a few) and paid off the rest with the proceeds. Got the titles in hand, and thought "What the heck are we doing??" and ran around like headless chooks getting them all mortgaged again! :D

    The Y-man
     
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  11. Jerry O

    Jerry O Well-Known Member

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    so it wasn't a good feeling to have the titles in your hand then? :D
    time to leverage more and let time (CG) pay for the loans later down the track.
     
  12. larrylarry

    larrylarry Well-Known Member

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    For me, it was a great feeling to have the paper...after a while, I realised I'm not going anywhere with it and having 1 PPOR paid off isn't going to be enough. ;)
     
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  13. The Y-man

    The Y-man Moderator Staff Member

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    It was nice - until you had to find a secure place to hide them!

    The Y-man
     
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  14. Jerry O

    Jerry O Well-Known Member

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    Excellent!
    The fact that you have done it, paying off PPOR, can only mean you can always do it again. So why not leverage from that and get a few IP's while we can was probably your thoughts at the time. :)
     
  15. EN710

    EN710 Well-Known Member

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  16. Luke T

    Luke T Well-Known Member

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    Can work for some people !-Although very hard and slow -In my book Its better than doing nothing and some people can be really determined in a single goal like this -and maybe less risk involved too in a downturn .
     
  17. larrylarry

    larrylarry Well-Known Member

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    I placed it under my mattress. :)
     
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  18. larrylarry

    larrylarry Well-Known Member

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    I wasn't educated investment wise then. I shouldn't have paid it off and should have kept it as IP.
     
  19. Drunkanbarbarian

    Drunkanbarbarian Well-Known Member

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    If the off sets are fully paid off it would kindof be the same thing
     
  20. Drunkanbarbarian

    Drunkanbarbarian Well-Known Member

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    If rent and cg goes down towards the people using leverage they would also be screwed