Hi, I’m Rixter and discovered SS back in late 1999. I’ve been investing for the past 15 years after reading the book ‘Building Wealth from Residential Investment Property ’ by Jan Somers, some years beforehand. We started actively investing in 2000 and hit it pretty full on, basically purchasing a property per year over the course of the following decade. Some years purchasing none and other years purchasing two depending upon financial circumstances and existing portfolio performance at time of each IP purchase. To date we have built a substantial size multi-million dollar residential property portfolio spread around Australia, which has afforded me the opportunity to fully exit the rat race last year. The capital growth averaging (CGA) strategy I deployed utilises a regular purchasing cycle similar to what dollar cost averaging is to the share market. The major underlying principle to its success relies upon your "time in" the market, not "timing" the market and revolves around the purchase of townhouses and villa’s. As such the idea is to purchase good quality, well located property in high density areas (metro area capital cities), at or below fair market value, as fast as we could reasonably afford and then hold them long term in order to realise the compounding CG across the portfolio. We chose to purchasing near new property over older style for the following reasons, in no particular order: To maximise non-cash depreciation deductions To minimise maintenance & repair costs More modern & attractive to tenants, thereby minimising potential vacancy rate Attract higher rent, thereby maximising yields Without getting into the "which is better debate, houses or Units", our preference is for townhouses & villas with a 30%(of lot) land area courtyard thereby eliminating high rise apartments that only have balcony's, for several reasons in no particular order: lower maintenance & upkeep for the tenant lower purchase and entry level into a higher CG suburb rapid growing market demand for these type properties - one of the largest groups being the Baby boomers coming into their retirement years and having to downsize for financial & lifestyle reasons. greater cash and non-cash tax deductions in relation to IP purchase price, therefore maximising portfolio cash flow. able to hold more IP’s across our portfolio - thereby minimising suburb over exposure risks and maximising portfolio compounding CG exposure across increased multiple markets. Early on in our journey we looked to purchase in metropolitan suburbs with a 7% historic CG that were approved for and/or were about to undergo gentrification...and that allowed us exposure to short-middle term CG to leverage against faster. I looked to where the government, commercial, retail and private sectors were injecting money, which ultimately beautified and uplifted the overall feel of the area. This in turn attracted people wanting to purchase, thereby creating demand and putting upward pressure on prices. It also increased our rental yields due to the demand of people wanting to rent in these areas as well. Later purchases we targeted metropolitan satellite cbd’s. We found these is be very good consistent CG areas with main arterial roads in/out of the suburb, public transport hubs, major shopping precincts, with high employment, good educational, medical & recreational facilities.. All the things people want to be located close by to and/or within easy commute. During the portfolio acquisition stage all portfolio cash flow we serviced via wages, rental income, the tax man, equity via LOC’s and/or Cashbond structure, and any other form of disposable income we had available. Prior to rat race exit we refinanced and topped up all our LOC’s to a sufficient level to maintain an available balance of 10 times our annual lifestyle expenses, plus the capitalisation of interest costs to fund lifestyle over that decade period also . The easiest way to explain what Im meaning by all this is to provide a basic example as shown below. For ease of calculation let’s say we have accumulated a $4 Million portfolio, structured for CG with 67% LVR that is cash flow neutral/+ . Additional to this we have a lifestyle budget of $1000 per week. The calculation would look like this and excludes adjustment for inflation: $1000 x 52 weeks = $52k. $52k x 10 years = 520k. LOC Interest on Interest capitalisation for $52k per year over the decade @ say 6.5%IR = $181k So the equity required to LOE over the course of the following decade = $701k (520k + 181k). Portfolio Position Start of LOE Harvesting Stage. Value $4,000,000 less $2,701,000 (67% LVR inclusive of $701k available & undrawn ) = TOTAL $1,299,000 equity(buffer) Portfolio Position after 10 Years of Lifestyle Harvesting. Value $8,000,000 less $2,701,000(debt) = TOTAL $5,299,000 equity Example on the cash flow component and use a very conservative 5% rental yield on the above example $4,000,000 asset base, with a 6.5% bank interest rate, starting the LOE harvesting phase. $4,000.000 x 5% = $200,000 rental income. $2,000,000(debt) x 6.5%IR = $130,000. At the completion of 10 years Lifestyle Harvesting – (assuming portfolio CG 7%) Portfolio Value = $8,000,000 DEBT TOTAL of $2,701,000 x 6.5% bank interest = $175,565. $8,000,000 x 5% conservative rental yield = $400,000. $400,000 minus $175,565 = $224,435 cash flow positive (less ~ 1% portfolio outgoings) After 10 years if one doesn’t meet bank DSR requirements for LOC top ups for the next 10 year round – there’s the option to sell down a portion of portfolio to pay out the $2,701,000 debt and LOR with a $5,299,000(less cgt & costs) mortgage free property portfolio . Anyway that’s the basic big picture of the investment strategy(including part contingency plans) we’ve used over the past 15 years.