Positive cash flow - goal to earn 30k a year.

I like Euro's idea of paying your home loan off and then investing.

"Instead - just keep attacking the 250K mortgage. You are going gangbusters. Keep it up. If you keep making extra repayments of say 2K per month ( 24K per annum) from the money you save each year, you should see that mortgage GONE in @ 7 years and 8 months . You'll own your PPOR outright.... then you can start getting sorted on the cash cow side of things."

Instead of property, have a read through the other assets section on the forum. You may find you reach your goals more quickly by buying ETF's (VAS) and LIC's (Argo, Milton, AUI, AFI etc) and just placing your savings into these on a regular basis.

Debt is not always the answer in creating wealth. (I have used debt to purchase numerous ip's over the years and done very well, but the financial independence community achieve fantastic results by investing their savings on a regular basis into the investments above).

Just another idea to consider, particularly as the lending environment continues to tighten up.

 

You would need a log in to the Pepper broker portal.

 

Again, all pre APRA

With all due respect - secondary income sources are not accepted by most lenders for servicing until 2 years can be demonstrated, generally - and in many cases ,while credit departments have some discretion in this regard , they tend to lean towards finding ways NOT to like that income when its IO INV debt thats being applied for. They shade it , or they flat out reject it, or they frustrate the process in other ways. It's generally more acceptable if the debt being applied for is O/Occ debt and P&I, and generally less acceptable if the debt being applied for is INV and IO.

So while at a personal level the additional income can be used to pay down debt faster, it's impact on borrowing capacity will be delayed until the debt reduction effect pays off or until a lender accepts it as income for servicing - which is at least 2 years away as a general rule....

We all agree that there are often ways to get things done, but these days they really arent producing benefits like they used to...which is why I outlined the OP's borrowing capacity realities earlier. No amount of extra jobs, odd jobs or side jobs going to be as effective as they were in the pre APRA era for helping him reach the goal in 10 years. No matter how many extra jobs, odd jobs or side jobs he performs, it just wont help him buy enough properties and pay them off to be left with a 30K income in 10 years. Even if he paid off the 250K today he would not be able to do it.

The OP already appears to be waaaaaay ahead of the curve with extremely frugal budgeting ( 15-20K per annum in living expenses for a couple + 1 dependent is outrageously frugal - that's $1250-$1667 per month. My mortgage repayments are @ double that per week! ) so I think they can reasonable argue they are already doing far more than the average Joe to maximise their situation.... and just about all that he can reasonably do . Even allowing for extras, the lending rules are the lending rules and there arent really any shortcuts around them aside from windfalls or lotto wins

 

Did you not read my post?

Nothing of what I said have anything to do with APRA

 

@euro73 and @skater both your comments are valid.
The rules of the game that are outlined by @euro73 are what we need to play by.
But there is still something called grit / preservation / determination to succeed.

If you understand the rules, you will find ways to work it to your advantage.
@euro73 You saw what was coming, and you saw the opportunity in NRAS. You can't say that you made on investing in NRAS alone. The NRAS property deals you put together made it a win for everyone - The developer, the buyer, and yourself. You saw the opportunity and you made it happen.

 

Just make sure you re read your current work contract before you do anything.
I've worked for a software development company, and my contract stated that ANYTHING I create, whether in company or personal time, was their property. How legal this was, I don't know, but it stopped a lot of my personal ideas.

 

have u ever considered commercial ?
35sqm shop in kingsford/glebe,kingscross around $700-900k,

rents around 60-70k A year. about double of what u getting for residential.
to get that rent you need a $1.5m property at the least.

also you pay zero out goings. (maybe strata).

usually 3 + 3 or 5 + 5.

way longer lease. and protects you, next tenants picks it up..

find a good business, cheapie takeaways/coffee.. low cost low margin..

as for recent sale.
Danks Street, Waterloo. sold for between $1m and $1.1m - annual rental - $99k per annum tenant pays ALL outgoings.'
1 parking + grease trap

this place is full of apartments, $1m apartment here rents 750-800..

at 100k per annum (just under 2k a week)

why would someone buy apartment @.@
oh yes, one caveat, been vacant about 6-9 months.

 

Some great ideas here, thanks all. In search for answers of how to achieve financial freedom, it brought me to propertychat forums. Got so many good ideas here, its unbelievable how much i am learning. Thanks everyone so far

 

Yep

It has everything to do with APRA because you are suggesting that what you did ( which worked for you in reaching a passive income) will potentially work for him -but it wont. Everything you wrote about happened before APRA. Thats a fact. And here's another one - if you repeated all of those things today they would have a much more limited impact now than they had back then. So limited that you and hubby would more than likely still have to work. So the outcomes are generating results that are literally poles apart. So I think its quite relevant to acknowledge the differences between the pre versus post APRA era's

In fact , here's what really makes the distinction clear- even the complete removal of ALL the 250K debt right now, today would not get him the outcomes you got. Wouldnt get him the outcomes he wants either, which are a 10 year goal, remember . Thats 10 years. Not 15. Not 20. Nope. Not even close. It would quite literally have less positive impact on the OP's long term borrowing capacity than the removal of NONE of the 250K debt would have had in the pre APRA era, because of the difference between 250K assessed at 7% P&I and 250K assessed at 3.7% actual , and because of the difference his $15-20K per annum of living costs make versus the 30K + of HEMS he is now considered to be spending, and because of the IO quota's.

In the first instance the removal of the 250K would "appear" to assist quite a bit -that's certainly true. It would allow him to borrow an additional 575K - or less if he purchased properties with yields weaker than I used in my example. So it might fool some into believing "job done" But beyond that 575K anyway he'd run out of puff again pretty much instantly ... because of the sensitised assessment rates and the HEM's. Its all well and good that the OP lives a disciplined lifestyle but bank HEMs dont care about that these days. I demonstrated clearly in the calculators above, where I ran a scenario where the 250K was gone - the he still tapped out at @ 575K with $675 rental income. Even if that was spread across 2 x 292.5K properties generating $337.50 each, or 3 x $191,667 properties generating $225 per week each, the tap out point is still around the 575K mark.... and that's with far better than vanilla yields and 1 dependent child.

But if you look at what he could have done in the pre APRA era, even carrying the 250K of P&I PPOR debt, he'd have been able to borrow 15 -20 x income using the right lenders in the right order, because of the lower assessment rate and the lower living expenses, and he'd never have had to migrate any of the debt to P&I. So even with that 250K debt in place he could easily have borrowed $1.2- 1.5 Million. Perhaps quite a bit more. That would have enabled him to buy 2 or 3 dual occ, or 4-5 x $292.5K properties or 6-7 x $191,667 properties.... and he could run it all IO for as long as he wanted and used the surpluses to pay a couple of them off in 10 -12 years - easily. No P&I cliff to deal with. No sensitised assessment rates. No issues harvesting equity. No problems reaching 30K + in passive income within 10 years

And thats why APRA ( pre v post) is relevant to what you wrote . You are suggesting that flogging yourself doing odd jobs or whatever, will help.... and really it wont. It just wont. Big pay rises ( and that could mean adding extra income from wifey) and big debt reduction are the only way to change the fact its going to take 17,18 years to get where he wants to get, rather than the 10 he had hoped for

Anyway... as is always the case, I say left you say right. I say black, you say white. I watch the sun come up. You swear it was a sunset. You bring up 17% rates. I remind you they were less expensive than today's 5% rates given the debt to income ratios of that time versus the debt to income ratio's today.... No matter how many times I prove the math, you just like to argue the point. You have done OK for yourself but you just dont have a deep understanding of the compounding impact of debt reduction on post APRA calculators . So moving right along....

He cant borrow the money . Cant fund the 40% deposit either for a commercial deal .

 

APRA has played a big part, but i believe @skaters message is not Pre APRA vs Post APRA (something you have may misinterpreted). It is simply about the ability to make things happen with whatever life throws at you and understanding the rules of game so that you can stay ahead of it.

Lets be honest here, if NRAS didn't exist, you wouldn't have:
1. Been able to purchase NRAS property to increase your income
2. Be able to sell NRAS property and get a commission which has helped your net wealth position

But for me to turnaround and make statement like "you have all this because of NRAS and if NRAS didn't exist, you wouldn't have the business you have today or any of your other assets" would just plain stupid. If someone made that statement about you, I'd personally tell them off for you and remind them that you have more intelligence in your left nut than they do in their whole body.

If NRAS hypothetically didn't exist, you still would have found another way to make money and you would still have what you have today.

 

Not knocking NRAS here ( I know little about it tbh) but there are many ways to skin a cat, APRA or no APRA. I don't care what anyone says. There are various ways you can approach this without only looking at 1 option. All depends how badly someone wants to achieve their goals. This is the problem when new investors are reliant on every Tom, Dick and Harry's view and not having their own broad knowledge.

Hear other's opinions, then do your own intensive learning over a few months independent of these views. Then synthesize it all together to come up with all possible options and strategies. Don't get tunnel visioned on any 1 rigid approach.

Expect to make some sacrifices, some perhaps big ones. If you want to achieve your goal then good on you. But the effort has to match the goal.

 

Clearly you didn't because I made no mention of him leveraging up to buy multiple properties. The only property I suggested was the inclusion of a g/f, but I also stated that I don't know if that's doable in Perth & that it isn't suitable for all properties. I only mentioned some of the things that we did in the early days to INCREASE INCOME. I also said this, which you conveniently ignored.

Yep, its a fact that before APRA, I sold tupperware, Avon, Cleaned Sani Bins, Babysat, did MLM, Mystery Shopped, sold on Ebay, etc.....what that has to do with APRA, I have no idea.

I never said it would. What I WAS suggesting was how to START the journey because a successful journey starts with taking the first step.

 

That's it in a nutshell.

 

One of my favourite songs - sums up what we need to do to succeed

 

Facts! nice one @Leo2413



Meanwhile, just to be that guy:
When I purchased property in 2012 at $250k, rents are $650/wk+ each.



@euro73 yes this was pre APRHA, though you should see what I've managed to do post APRHA, mwuahaha (not much, but my mums impressed).

What I won't do is beat my chest and say I knew I was timing the market right.
I had an idea it was a good area to buy and I happened to be earning a great income, the rest was pure luck.

@barduck, euro73 is 100% correct. You can't do what I did. But that's the point @skater is making, you don't have to. You do you. Go out there and make mistakes, that's freedom.



The 'where' or 'what' to buy is irrelevant, still blows my mind that is the most popular section on this forum. It's the mindset that will help you gain momentum. As stated previously on this thread, the market will change, and the strategies that worked at one point in time may not work the next.

Figure out where you are, where you want to go, by when, then fill in the blanks.

It's the mindset you have to get right, the investment vehicle is almost irrelevant, doesn't have to be housing, could be selling pens. Like literally, BIC pens. Not gna tell that guy the only way to wealth is 6% yield properties.

 

Logan central - median prices were at $230k (In 2012/13 though). Lots of 3bdrm houses selling well below $330k in 2014 though and renting for 300+

 

Below $230k

 

On reducing spending. I agree you couldn’t get any lower. 15k per year is nothing.

For example. I but almost no expensive things. I do drink 1 coffee a day and buy lunch 3 days.

My childcare, train to work on the days I can’t ride and lunch would be more than 15k a year. I have not paid for phone, internet, water, gas, electricity or food yet.

300 bucks a week is breathtakingly low. I would estimate we spend 200+ on groceries for a family of 3.

 

I think I have an idea of how to go about this now. I will work towards reducing my non-income producing debt as aggressively as possible (which is only my PPOR homeloan currently), by making extra repayments into my home loan. This will increase the amount of deductible debt that I can take on. This is as per euro's suggestion.

With the increased borrowing power, I will either:

1) Invest in assets that produce positive cashflow and have potential capital growth AFTER i have paid everything off.

2) Invest in Income producing assets using a debt recycling strategy. I have some experience in trading shares, so plan to buy dividend producing shares that provide a net positive cash flow, and doing this when markets are at maximum fear with an investment timeline horizon of 10 years, to maximize upside potential. This may also be done with high cash flow residential assets such as dual-occ / nras etc, however i will require significant borrowing power as euro mentioned, so I will defer on this approach.

I just found out I'm getting a salary bump of 15,000 dollars pre-tax also !. This will also accelerate the strategy further. (small promotion)


I've also listened to Rich Dad Poor dad by Robert Kiyosaki, and Richest Man in babylon (Fantastic book btw) both on audio book to increase my learning

Thanks all for the kind help and wisdom. Great bunch of ideas here. For now I'll focus on smashing down the home loan PPOR debt as fast as possible, with the view of getting into debt recycling later on.