How Much Cash Flow Do You Generate Today???

Have you thought of liquidating some of them and working on improving the cashflow?

 

NoBut take a long term view.

No. One property was purchased for $128k and is now worth $1.8m. If I sell, I pay ~ $400k in capital gains tax. The $400k is sure enough a real liability and is payable at some point, but not until I sell. I would rather hold and enjoy the benefits of what is effectively an interest free loan from the Australia Government of $400k. Apart from the 50% discount on capital gains, what I am describing is the other real benefit of CGs over yield/cashflow. That is, unlike income/cashflow, tax on CGs is deferred, and the deferred tax is effectively invested for your benefit during the period up until you sell.

 

Sometimes its about changing mindset
Most investors continue accumulating and ignore market cycles.

Just imagine selling prior to downturn and sitting on cash ready for future opportunities

 

Fantastic result

For me property is a business, if I can use the capital to continue to grow wealth and cashflow I am in regardless of tax. Good acct helps

Building net worth is good, but at the end of the day its just numbers it needs to translate to financial freedom/cashflow to sustain lifestyle

I never again want to be a slave to property

 

I get somewhat bemused by all this CF v CG debate. Don’t care whether I get $1 of CG or $1 of CF. All the same, except of course the CG is taxed differently. It is discounted (50%) and deferred (paid on sale and not yearly like CF) which makes a big difference. It is a nice sunny Sunday here in Melbourne, so really trying to avoid this perennial debate. Each to their own I say.

 

What do we consider regional? Is Brisbane, Adelaide, Hobart, Canberra regional? Or do you put on these in the same category as Sydney and Melbourne. What about properties right on the edge of capital cities and will eventually chewed up by the urban sprawl. Geelong, Warragul in Melbourne are examples. May take another 25 years for this to happen. And then there are the towns > 3 hours away from a capital city that are in another class altogether. Albany, Bunbury, Albury, etc. All require a different strategy.

 

No debating at my end, you need both.....but timing is everything

 

Cool mate. Then don't complain about eating food on a budget..
Taxes are going to eventuate regardless. It how many years of your life are you going to continue to suffer for it?
peace

 

Not suffering and not complaining. Far from it. Comments about cut lunches tongue in cheek. Peace.

 

The banks do care
They do require CF to repay prin

What sort of net yield do you get on the $1.8m property?

 

Hi Beano. 1.4% gross yield on $1.8m. $500 per week in rent. Re banks, I essentially rely on large PAYG to fund future purchases. Bought property >20 years ago so large CGT if I sold.

 

If you choose properties with yields of say 6.5% to 9% surplus used to repay debt in metro markets vs a smaller portfolio wit

So about 1% net yield ?

 

Well, non interst costs are currently running at 36% of gross rent (land tax is the big killer), so your numbers re net yields are spot on.

 

I can see the logic why you do not sell
Paying $400k in tax hurts

 

Your CG over the last 20 years has exceeded my wildest dreams
It highlights a small % CG difference between several investments is pretty major over 20 yrs

 

Is this just one sample of the many properties in your portfolio ?

 

Yes. First property I bought 25 years ago. Just out of university. Yield based on current market price. Purchased for $128.5k.

 

When you chose properties do you purposely chose CG over higher yielding ?

 

Not really. Mind you, on my first property, 25 years ago, I did not know what those terms meant. In fact, I did not even realise the agent was taking dummy bids from the lamppost across the street. Only twigged to this about 5 years after the purchase. Was essentially just muddling my way through, learning as I was going, and trying to avoid making mistakes twice. Since that time, my strategy (if I can call it that) has been to buy close to the city in suburbs that had generally poor reputations but great fundaments and areas I thought would gentrify in the long term. Note that reality on the ground in a suburb is generally 3 to 5 years ahead of what people think (as a market research exercise, I often casually mention some of the suburbs to test reactions, and people will often say, oh that is a ******** place. To me, that’s good). Think of suburbs like Broadmeadows. Focused on suburbs close to the city (10km out from Melbourne CBD). Latest purchases have been in the western suburbs of Melbourne. I suppose I look at the overall long term return. Always had enough money to fund day to day costs so small returns on yield side have not bothered me. Always paid P&I. Never had a single IO loan. Always bought and never ever sold. I am not holding this out as the perfect strategy, or the only strategy, but just saying it is something that has worked ok for me. Beano, I appreciate you showing the interest.

 

That is great discipline I wish I had held all the properties I brought instead of selling (I would have 5 more )