My intention to LOE

Thanks Sash
I'm in the East..and work in the city. Yeah am interested to hear how you're going to pull the pin yourself as our portfolio size is quite similar.

Would love to come to the meetups but can't be arsed driving out west during peak hr, hence why I never have. In answer to your questions:

1. I'm comfortable with rents as the sole source of income. But it's obviously currently inadequate in magnitude. Need at least $50-100K more pa (from rents or another reliable source of income).
2. Yes but its in the scheme of things too small to make a real dent in debt levels. Plus I have no idea how I'd qualify to tap into it before 65/70 if I have no true economic hardship.
3. you referring to landlubber?? Or Rixter?
4. no, just the mid growth scenario....which is the most likely.
5. I'm struggling with the concept of letting go of the portfolio - in part or in full. You have no idea how many times equity has saved my butt and gave me SANF - particularly before and during the GFC. I'm of the view that the larger the portfolio (within reason), the safer I am. Comes with a number of provisos of course. But I'll take it under advisement ie selling.

 

Would it be right to assume that if I liquidated everything, I'd wipe out 35%-40% of my paper gains? Is that an overly aggressive calc? All properties are investments and held longer than 12 months.

 

OK looks like you know the biz..and you are going in eye wide open.

Landlubber was the bloke! Yes he had a incredible portfolio of something like 35+ properties...but I think he sold some....but in the end did well anyway...with that sort of porfolio....you have time...

If you survived the GFC then you should go okay..

 

Yeah true...contemplating this exactly as part of an exit plan..not easy...

 

Assuming the properties are owned by persons then the 50% CGT discount would apply. Max tax would therefore be about 25%, but possibly less. You could time the sales so one occurs per year. You could also implement some strategies to reduce CGT - prepaying interest, contributing to super etc.

 

One strategy maybe just to sell off enough property to pay off the non deductible debt, then reborrow it to invest in shares.

 

Terry... I know this is random but... I always appreciate your advice.

 

@Lacrim... you da man (or woman!)
Awesome work.
Sydney Sydney Sydney, oi oi oi

 

Second this TerryW, always unselfish with your creative, laterally thinking solutions.

 

Why would do that...liquid when you have no income...what is the rush??

The CG is going to be a biatch if

Great in theory...but requires careful planning....and it is dependent on how much the gain is...grappling with that one now!

 

Hey let me know how you go in terms of pulling up stumps..I am being a bit more certainty in these uncertain times. So a couple years away to pull up stumps...more like 2020.

 

Have to say, I am firmly with you on this, there is no need to spill your guts online & your paranoia is wise I would say, or put another way, it certainly can't hurt if you keep you business to yourself.

 

Based upon the responses thus far (thanks!) and facing up to some cold hard realities, I think the only way to safely facilitate retirement in 2 yrs is to either:

1. generate another $50-60K pa min. in additional rent OR
2. pay down the $900K on the intended PPOR very quickly (and I don't mean shifting the $900K elsewhere ie it needs to be paid down).

Achieving either is a massive challenge and probably insurmountable in 2 yrs. It'll entail me spending some capital on completing a development on one of my props and a granny flat or two to boost rental returns. Natural increase in rents won't cut it - I'll be lucky to see any increases in rents in the next 2 years the way things are atm (low interest rates, slower immigration, more supply coming on the market, govt intervention ).

Retirement may need to be pushed out by a couple of yrs to ensure I can do the above - those are my thoughts.

Structurally, my takeouts are:

1. top up all IPs/LOCs just before retiring
2. make sure they're all un x-ed
3. make sure the LOCs are not at call
4. make sure the increases/LOCs are standalone with new loan numbers
5. For as long as possible, use the LOCs to pay bank interest
6. Use net rents to pay for living expenses. Any net rents left over to be parked in an offset account for the PPOR (hopefully within 5 yrs the PPOR will be fully covered)
7. Post retirement, try between partner and I to earn approx $40K in today's dollars to supplement income and not waste our tax free thresholds. By my calculations, this is optional and won't be needed. $3 mill in equity should be sufficient.

TerryW this look like a sound plan?

 

Check out this thread I started on franked dividends:
Tax Tip 114: Franked Dividends and Tax

 

Have read TerryW and its enticing but in truth I couldn't partake of this unless I sold down correct? I suppose if I got my hands on the $3m, I could divert those funds to blue chip shares with good yields but it would be a pretty marginal yield play - in the short term at least.

 

That sounds like the start of a plan. Get some paper out and start drawing. Get excel out and start spreading

On your points:

5. Get some tax advice before doing this. It would only be advisable in limited situations.

6. same


Have you thought about (assuming you have a wife):

- Mini retirements?

- Letting your wife keep working? (it will make your retirement more enjoyable)

- Going part time

- Selling one house –

o perhaps a poor performer,

o one with large land tax bills,

o one with the most equity etc

- Any properties able to be sold CGT free?

o 6 year rule

o No taxable gain

- Borrow to pre-pay interest before you quit working?

- Letting wife go first and selling property she owns

- Borrowing money from your wife for investment purposes

- Wife capitalising her interest

- etc

 

You are entitled to your views. But with sharemarket because of it's high volatility you can pick and choose a timeframe to prove your point.

You started 2010. If you started May 2009 you could pick up VAS at $49. Today it is just shy of $67. So over the last 7 years it has CAGR of 4.57%. Not great but good.

Let's look at dividends. It is safe to assume they will be around 70% franked mark.

I could only go back to Jul 2009 as starting point. So below are rolling 4 quarter dividend summary starting Jul 2009

Timeframe-------Dividends----Grossed dividends @ 70% franked
Jul09 - Apr10-----$2.0385 ------$2.65
Jul10 - Apr11-----$2.6846 ------$3.49
Jul11 - Apr12-----$2.4467 ------$3.18
Jul12 - Apr13-----$2.6700 ------$3.47
Jul13 - Apr14-----$2.8547 ------$3.71
Jul14 - Apr15-----$3.0187 ------$3.92
Jul15 - Apr16-----$3.2956 ------$4.28

So the increase of $2.03 in 2009 to $3.29 in 2016 is respectable 7.10% CAGR. In 2009 gross yield on $49 was 5.4% and the gross yield today is 6.38%

I hope that gives you some understanding that about returns from the index. They are not great but definitely better than inflation and you can always add bit of leverage to make it look even better. The best part is you don't have any hassles it is truely passive. You can go on a holiday and not worry about anything.

Cheers,
Oracle.

 

Good post...definitely a good option to park some money in places like VAS.