Passive Income From Real Estate.

On a more serious note ( although borrowing capacity is certainly a serious topic ) passive income from real estate is what my business does.

The Dual Occ's we sell produce more than enough income to pay themselves off within 20 years ( assuming you borrow 100% + costs) or less than 15 years if you contribute cash for deposit and costs and only borrow 80% , without any contributions /extra repayments required from outside the rental incomes...

They sell for @ 660K and deliver @ 40K rental income right now, in markets with vacancy rates below 1% , but if we used conservative estimates of just 50% rental appreciation in 20 years , your properties would be generating @60K Gross in 20 years.

2 of them would be generating @ 120K Gross
3 of them would be generating @ 180K Gross
4 of them would be generating @ 240K Gross
5 of them would be generating @ 300K Gross
ETC ETC ETC
.

 

But lenders have been and are already extending lending terms, aren't they? We just refinanced few IO loans to lower % and pulled out equity and title and I just noticed they gave 30 year loan terms, spouse is 60 so till next 30 years would make him 90 (ouch!).
I think lenders and government rules will be changing as they see fit and no body can predict that. Just look a year ago with APRA tightening lending restrictions and now...who knows?

 

Haven't you heard? 90s the new 50.

 

90s the new 60, so it will be 100s for me in 10 years time, since I need to keep refinancing as @kierank suggested not to repay the debt!
Like him we keep pulling out equity more and more unsure what for??????

 

extending IO terms on existing debt is not remotely the same as lending you more money to pursue a LOE strategy . And then doing it again when the first tranche has been spent. And then doing it again when the second tranche has been spent ..., etc etc etc . It sounds as though you aren’t properly across the changes to assessment rates and the treatment of IO lending and the Scrutiny of living expenses and the restrictions to cash out

 

Your income must be huge to be able to cashout nonstop.

 

I think this thread has gotten a little off topic with all this talk about LOE and such.

The thread title is "passive income", which to me reads like supplementary income, and not solely about living off rent, and certainly not about LOE. I suspect OP means he'll keep his day job for the foreseeable future and supplement that with a bit of extra income from rents.

 

Even if the asset worth net worth grew more than the loan, LOE taken?

 

Well assets could grow faster too....so in our case it's a combination of things.
So if you are implying earned income then NO, not really, but structuring earned income, other passive incomes, franking credits, and deeds of forgiveness and assignment from trusts helps in that respect, helps with serviceability for large equity draw downs where the net asset worth is quite substantial too. As you are aware you need both, right?
In addition your structures and finances are vital too, for example having trusts, companies.. or even fixing some loans and having IO can assist with more serviceability too (but not all lenders will take these into account or will differ how much).
I suppose...many ways to skin a cat
I suppose I discovered few years back that income alone does not make you wealthy, more income more tax, .... although many here will disagree and are after income or CF only?

 

Why would you not live off the property profit instead of pulling out equity ?

 

For investing more, for now it just sits there for opportunities, to minimize land tax in SMSF...
Like @kierank suggested his debt grew for further investment, although I am already looking towards exist strategies.
Agree though, but we still run our business, I am still too young as I have few years till 60, then access to SMSF for both of us could make this extra nice but heavily invested in SMSF in RE too and both above TBC.
So in SMSF we lack liquidity but paid off offsets would allow to cash out required % rate based on age and also minimize land tax (custodian trusts each have a separate land tax threshold - would not like to transfer titles all under SMSF as this would push us up another threshold).
Different entities require different strategies....having choices makes it great.
As my mentor said, having many passive incomes I think is the key, if one dries up one can draw on the other.

 

By the way @kierank I should let you know....
Remember the conversation we had some time ago about a year or so when you refinanced and obtained IO loans and illustrated the plan during those APRA/lenders changes in rules/regulations.
We just did the same, refinanced IO expiring loans back to IO, although still in accumulation phase so not accessing SMSF yet, but had no problems like you in obtaining IO loans, pulling out a title, drawing extra equity, and on top of that negotiating very competitive IO %.
I was even willing to consolidate too... for lowest IO rate and simplicity... but my broker suggested NOT YET, so instead created additional 10 accounts with ANZ (gee - lost count of accounts now!).
It was worth it though... more administration but we hold more titles, more funds, and more control instead of lenders.
As @Beano said could live off passive incomes....but for now cannot even park funds in offsets as we would need to invest more.
I don't know about you both but do you reach a stage where you think why I need to invest more?

 

The stage I like to reach is investing in less tenants larger properties for ease of administration.
Investing in lessors interest in properties that have high building value low land value.
So the answer to your question ...just something different!

 

Which I know not much about! Agree a different cup of tea or coffee.
Have friends who with age preferred to diversify into more commercial but still hold both.

 

Nah, I love investing. Hopefully, I will forever.

For me, it is like driving up a mountain - the higher one goes up, the better the view keeps getting.

 

How about this one ?
Funding cost 3%
Highest offer $14m
Yours possibly for $15m
Mortgagee sale
Industrial for sale | 22–24 Amyes Rd & 16 Branston St, Christchurch | Colliers International

 

Actually what is interesting is that a very young friend was just hired by Colliers so should get together to discuss future possibilities (thanks).....?

 

Borrowing off equity so effectively 100pc funded this should give a net income before tax of $1m pa

 

Meanwhile I can only hazard a guess that these are so inexpensive because the strata must be exorbitant to run the facilities of this student complex:

Ridiculous price: $100K for three-bed townhouse - realestate.com.au

I'm sure investors are spooked by the foreign student exodus too. But the one cited mentions $135 per week for just one of the bedrooms occupied; over a $99K purchase price.