LOR, 10yrs, how to?

Instead of putting a dollar figure on income alone (because everyone saves and spends differently) let's say the ability to pay down 100k of principal a year.

If you did that over 10 years, purchased 4 or 5 properties in Sydney or Melbourne, caught one cycle, had a few rent increases you would probably scrape in for around 100k clear LOR.

 

You are spot on @Rolf Latham
TV Shows make these things look very easy and fruitful.

Fact is for me I had a number of things in my favor.

• Purchased at the right time and sold at the right time
• Lived in the property whilst I subdivided so holding costs were not an issue and still need to confirm some taxation considerations but could be alright on that front as well.
• Brother and Brother in law are both tradies and I have access to good tradies as well for the renovation.

It has been very rewarding and on top of that I now have a lot of education regarding the process which I know will hold me in good stead for my next project BUT if I had not lived in the property and were paying holding costs it could have been a very different story.

 

Damn. I can do something about the brother-in-law, but I'll have to think how to get a new brother...

 

Well, sounds like my 10-15 yrs left means I need a new strategy!

 

Curious what your strategy might be?
Still with property? Shares? Superannuation?

 

Build/buy duplexes. Keep on a Single Title. Almost the same rent as 2 houses, but at less cost. I'll be moving onto these from houses this year, as I'm sure many others will be, to increase cash flow.

We are on the same timeline of a 10 year goal, but my partner has put in an order for a PPOR upgrade somewhere in the next year or two also. Head down bum up.

 

Haha mate my brother is an electrician and guess what the last thing to get done was?? I was calling him daily to install a downlight here, PowerPoint there. The stress he caused me I may have been better paying for one (mind you he owned the house with me).

 

I hear you.
On the other hand, I've just passed my 6th personally referred builder (from friends, family, good REA) here in Canberra for a small reno. Three never turned up - each getting three chances at times THEY nominated. One turned up and said he'd quote but never heard from again. One turned up, quoted, and was booked to start work then "went on holiday" and then the excuses started. The last one turned up, quoted, but the quote was 100% above what other builders costed (incl two from interstate I know and who I asked to give me their "official" quote without of course being able to do the work). ie. they really didn't want the work, but if I said yes they were really going to slog me for it.

 

Hmmm. So essentially you're saying go for very high yield? Perhaps only new builds to increase depreciation but lower CG, or only old/existing in good areas to increase CG chance but with lower depreciation?

I'd be very interested to hear more about your 10 yr plan - I'm still thinking of a new strategy and would love to hear how others see their plan in that timeframe. How many properties, balance of CG vs yield, etc.

 

Of course CG enters into it. We typically bought high yielding properties. We bought quite a few under market and did reno's to manufacture CG and also made the properties CF neutral to CF+ from day one. Repeat, repeat.
We did this for 5 years and had a small cashflow. Then the Sydney boom hit. Woohoo!! Everything almost doubled. Sold a few, Stuck money in offsets. CF increased. I just retired. Our cashflow is on the low side but I didn't want to work anymore. I could have sold a couple more but I know I would regret it. Of course if you need $100K+ CF it takes longer.

Not your only options. You can- Renovate/develop etc to increase equity and use tghis money to pay down loans (put in offset) of increase your buying power.
Property is not a spectator sport. You need to get in there and make it work for you.

 

I'd love to tell you - but I don't have it yet. The good points everyone has made here is making me spend lots of Excel time to model how to get to my endpoint. I'm not particularly keen on shares as I like things more under my control (or at least perceived control!). Super will be a part of it, but I won't have much hence wanting to supplement.

For everyone, what do you think reasonable estimates for 10yr planning for property-related things like rent increase, yield you'd like/expect against CG, etc?
For example, I've been using 3% average annual rent increase, finding a property with yield of 5% gaining an average CG of about 4% (from the average of the 10+ year history of the suburbs I've been looking at).

 

..and just checked super - oh great, it's done down about 4+% in the last 12 months

Given the state of the economy and the stock market, none of the obvious pre-done choices seem sensible (high growth, growth, balanced, etc.). Anyone have suggestions?
Sigh - it could be time to look into SMSF...

 

Rent increases vary with what's happening in the area. I've got some propertys that I've increased every 2-3 years, another every second year. Bout 2% per year so far.
Cg can vary, some up 10% per year for last few years, one had 0% past 3 years.

 

Changed mine recently to conservative, my finance guy told me to put it in growth at these prices. I'll change it soon.

 

The current environment in the stock market is actually a great time for a long term buy and hold approach.

 

See, I've spent time researching how to go with property and absolutely nothing on the stock market. I wouldn't have thought that at all...

 

Hmm, I've been in high growth for a year or so and it doesn't look good at all. I'd be surprised in growth is much better? Perhaps it's just the better of a bad bunch...

 

It's fundamentally similar. You buy assets that present good value and strong cases for long term growth and income. Obviously in the current mark when the prices are falling the comparative yields are rising, meaning if you are buying for that income and the long term fundamentals are strong that you can acquire a good value asset and a great return.

Shares have historically grown at similar rates to property as well.

The major difference is shares are more difficult to leverage than property making it hard to generate the massive exponential growth that many on this forum have achieved with property. If you have 100k of shares, you've basically got 100k of shares, if you've got 100k of equity in a house, you've got the deposit for the next house, so to speak. This isn't entirely fair as you can often leverage shares but generally to know where near the extent you can property and it's a far riskier proposition.