Hi I'm Rixter and this is the IP Strategy I used to Quit Work

Discussion in 'Introductions' started by Rixter, 25th Jun, 2015.

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  1. keithj

    keithj Well-Known Member

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    Great stuff.

    I'd like to respond to this part of you expected journey. I've quoted the whole post for reference, in case you edit it again.

    The specific risks I can see in this scenario are -
    • your assumption that the next cycle will take no more than 10 years - what if it's a little unusual and stays flat for 15 yrs, then doubles in the next 2 ? ... or worse still takes 30 yrs to double ? or just tracks inflation ?
    • your assumption that living expenses will remain at $52K for the next 10 years - surely they will increase at the inflation rate ? This will increase the LOC required by over 25% with an associated increase in interest costs.
    • your calculation that the LOC will cost $90K in interest over 10 yrs - by my calcs at 6.5% (taking inflation into account) it's out by a factor of over 100%! (I note that you have since amended this figure. However, when living expenses are indexed this figure needs further corrections & of course will flow onto ALL further calcs)
    • your assumption that rents will increase at 7% on average for the full 10 years is IMO flawed. Rents generally increase at close to the rate of inflation (indeed the inflation figures are partially made up from rents). IMO it is a grave error to assume the yield will remain at 5% (or whatever it is now).
    • There appears to be little contingency in the figures. There's plenty of what if scenarios that can happen to a portfolio of IPs - there are people here who have assumed they are fully insured for flood/ fire/ hail/ whatever, only to find a deep pocketed insurer will fight for years before acknowledging liability.
    • The 'buffer' the OP claims to have. I would not consider to be a buffer because it isn't actually accessible. Only the amount up to 80% is actually accessible, the remaining 20% cannot/should not be touched.
    The OP has a contingency plan after 10 yrs - sell some properties. However, this contingency plan has significant risks too -
    • What if there has been little growth (an 15 year flat period, before the expected 2 yr doubling) ? There is no equity left.
    • You may be a forced seller in a down market.
    • The bank may take any excess funds over & above the mortgage to pay down other IP debts (this can be avoided if you have one property per bank ie 15 IPs, each with a mortgages at a different bank)
    The OP appears to be attempting short term LOE, while waiting for rental growth to catch up. Based on the flawed assumptions & calculation errors I would question whether the example given is pulling the pin to early. Hence my earlier suggestion that he revisit of the assumptions & figures & risks.

    I have started a new thread outlining Generic LOE risks - they aren't specific to this imaginary scenario, although they obviously all apply.

    LOWWI - Living off Working Wife's Income - another acronym to add to the list [​IMG];)
     
    Propin likes this.
  2. sash

    sash Well-Known Member

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    Ya...mean...it doesn't.?????:oops::eek:

     
  3. MRO

    MRO Well-Known Member

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    Perth
    Just because he has 'retired', doesnt mean he cant go back to work. I am sure if the plan didnt work Rixter could just sell some of the properties and return to a standard job like the rest of us. There is always some risk that the plan doesnt work but I dont think the risk would mean the end of the world.
     
    Gypsyblood, Perthguy and teetotal like this.
  4. Redwing

    Redwing Well-Known Member

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    Pity Rixter is no longer here

    Updates on some of the strategies are always a great read
     
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  5. Wukong

    Wukong Well-Known Member

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    NSW
    +1
     
  6. willair

    willair Well-Known Member Premium Member

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    ....UKI nth nsw ....
    It's a pity he does not post anymore,i talked too Rixter a few times in the old chat room just had a different plan on retirement ,,and a lot don't post anymore..
     
    Investig8 and MTR like this.