Retiree keen to achieve financial independence

Discussion in 'Introductions' started by Daniela, 11th Feb, 2017.

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  1. Daniela

    Daniela Well-Known Member

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    I suppose you could call it a cash flow problem. The principal repayments are not enough to pay off the loan in the 5 years timeframe. I would need about 9, all else equal.

    And no, we do not want to keep building houses. My thinking is that if I manage to pay off the loan in 5 years and not sell any of the current assets (could sell new one(s), to help pay off the debt in 5 years), there would be enough inheritance for the kids and for my husband and I to live a comfortable life, whichever way we chose to do it.
     
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  2. Perthguy

    Perthguy Well-Known Member

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    Ok, well not building limits your options a bit. I am not sure capital growth alone will get you there but it's worth a shot! Why not?

    Just keep an eye on Hobart, Adelaide and Perth and buy which ever makes most sense at the time.

    Maybe also look at some newer properties with depreciation benefits and higher rents. These will help with your cashflow.
     
  3. Daniela

    Daniela Well-Known Member

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    I'm doing Airbnb in two of the apartments; any more and I would start to upset my long-term tenants, which I do not want to do as I have a great relationship with them.

    I hear people saying great things about Airbnb but I cannot say that my experience reflects this. Return is ok, maybe slightly better annually compared to normal rent, but there is much more work and a risk with every new guest. I am only doing it because it protects the very old building, in that there is much less wear and tear (so far, at least!)
     
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  4. Daniela

    Daniela Well-Known Member

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    Thank you for the advice. Yes, I think finding one or two positively geared properties, even with medium capital growth potential in the 5 years timeframe, should just push me over the line, fingers crossed.

    Thanks again for all your comments and guidance. Much appreciate them. And I will look into the other investment option that you mentioned; promise!
     
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  5. Daniela

    Daniela Well-Known Member

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    Not a problem about sharing!

    We pay about 20K/yr in land tax, all up. It is the main reason we did not strata title. And yes, my kids will inherit a pretty significant tax burden, but my understanding is that this is materialized only if they sell?! It is a reason why we hope they will not, but instead use the rents to help with their family expenses, and hopefully remember us in a nice way:)

    As for the capital gain if we sell, I asked my accountant and when he told me I decided that was the end of the discussion:-(
     
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  6. Perthguy

    Perthguy Well-Known Member

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    No worries. I am sure you will figure out the right thing to do.
     
  7. Daniela

    Daniela Well-Known Member

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    I apologise for misspelling your username:-(

    I knew there must be catches about commercial lending! Thank you for clarifying.
     
  8. wylie

    wylie Moderator Staff Member

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    This raises a couple of thoughts.

    If you "could" split or title the properties into apartments, you could sell in different tax years and as you sell down, pay the tax for that apartment only. Spread over a dozen (however many apartments you have) years means spreading the gains over those tax years. Prepay interest on your loans to lower the tax for that year (especially effective if you have several loans and don't have to prepay everything, which can create issues the following year).

    That way you could put your money into superannuation or direct shares and have (so I'm told) similar growth as the same value held in property, but you lose the maintenance, land tax, management.

    This is a path we are thinking of taking.

    Your kids may well love the properties, but with such high maintenance and running costs, you may find they sell them off anyway. It has taken me a while to even consider that our money will likely grow as much held in shares and/or super as held in property.

    We've not pulled the trigger yet, but it is something we are seriously considering.

    I'd still like to maybe buy, renovate, hold for twelve months and sell as a way of keeping me interested.
     
  9. kierank

    kierank Well-Known Member

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    I am not a lawyer but my understanding is that it all depends on who/what owns the properties and what is in your Wills.

    I assume you would have taken good legal advice on this.
     
  10. Daniela

    Daniela Well-Known Member

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    If that's the image you built in your mind about me, I'm sorry to disappoint but I am nothing of the sort. There are people that can work hard to build a secure retirement and support their kids and grandkids (because they chose to), while at the same time enjoy their profession and contribute to the community, and I am proud to be one of them:)

    As for travel, it is only because I got to travel significantly over the years both with work and privately, that I realized that there is sooooo much to this world that I would like to explore.
     
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  11. Daniela

    Daniela Well-Known Member

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    There have been a few very interesting and useful comments made by members in this forum about shares, and I will follow up on these. And I don't think I need to sell an asset to get this started in the SMSF. Seems that you have already considered this in a lot of detail and consider it a positive direction to take, which is encouraging for me. Thank you!
     
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  12. Daniela

    Daniela Well-Known Member

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    Sadly, not yet other than the bare minimum. I am very aware is something I have to do though!
     
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  13. Daniela

    Daniela Well-Known Member

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    I think I got your attention with my 'case study':)

    I have in mind something less burdensome: buy an existing house on a large(r) block, perhaps do some cosmetic or low stress renovation before giving it to a good agent to manage a quality tenant so interest on the loan is taken care of, and sell a bit later with either subdivision or dual occupancy plans approved. Any thoughts?
     
  14. Daniela

    Daniela Well-Known Member

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    I think I gave a few members a very wrong image of myself.

    I am not stressed about my debt. I look at it as a challenge I would like to tackle, that's all. And I raised the issue in this forum because I read many interesting entries on all sorts of property-related investments, and was keen to learn something myself.

    Sure, there are many people that would kill to be in my situation, and believe me when I say that I know what it means not to have food on the table! It is the reason I think of my children and grandchildren's needs and how I can support them, and also why I would like to fully retire soon, rather than continue to accumulate wealth.
     
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  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes that is correct.

    And yes the kids will only trigger capital gains if they sell.
     
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  16. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Daniela

    Ever thought of sacrificing a property?

    You could buy a new one (or several) and fatten it up and then sell it and use the capital gains, after tax to pay off the other loans on the remaining properties.

    Or instead of paying down the loans invest the money you would have used in to super, making sure you don’t over do it with the contribution caps. After retirement take a lump sum out and pay off the loans.
     
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  17. Marg4000

    Marg4000 Well-Known Member

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    Surely your children will support themselves and their children?
    Give them a good education and they will make their own way in the world.
    Marg
     
  18. Daniela

    Daniela Well-Known Member

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    Hi Terry_w,

    On the 'buy and fatten', that's what I am considering doing, and look forward to Perthguy's view on my suggestion about subdivision and/or selling with building approval, rather than stressing about building myself, fully aware that I would not maximize my potential return by doing so.

    I have a question for you on the super front: I am considering doing the above under the SMSF, where I can sell and take out a lump sum when I am eligible, without having to worry about CGT. What are your thoughts about this, please? The funds would go into the SMSF as a loan, rather than as an advanced three-years contribution.

    Thank you also for clarifying the CGT trigger for my kids. Much appreciate it.
     
  19. ellejay

    ellejay Well-Known Member

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    I clearly said the example wasn't similar to yours, it would be worlds apart I imagine! There do seem to be a good percentage of investors though like yourself, who have amassed an amazing portfolio of properties that are low yielding so don't create enough net cash flow for the desired lifestyle. Neither can the equity be enjoyed because it is designated as an inheritance. Nothing wrong with that, it's a personal choice. I'm sure you'll find a way to reach your goal ☺
     
  20. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes super is a great place to do these sorts of things because of the potential tax savings. Just get legal advice beforehand.