My personal State of the Nation and next financial steps ...

I found a multiple income 3 resi property in Germany. Found it while planning a holiday. 20% yield and I think it will be higher since I noted that it had lots of 1night gaps (its a 2night min stay). On Booking.com - better language and currency and problem resolution tools.

I now put the one nighters on Airbnb a month out and accept that the changeover fee is high but since its all profit - who cares. Its the secret of marginal income. Costs are largely fixed. So whatever we get after cleaning is profit. And the fee isnt that much anyway - Its just its same as a 2 night stay. Most stay 2-5 nights. I reckon yield could even approach 24% + now we seem to have a almost 100% occupancy rate. No shows are a 100% charge and the former owners cant remember it happening except a family issue - With a few days notice we can replace any booking. We are happy to refund then if we can get a replacement. The secret to that is its popularity in both summer + winter.

Last weekend we had a drama - Area was snowed in due to blizzard and transport all cut. Those staying were happy to extend stays and ski around town and those who couldnt get there got their money back. Smiles all around. People come back year after year I believe. As the agent says - Why charge people for their lost holiday. They will come back if you give the money back. 5 stars are better than reviews with a one.

 

Reviving this thread to see if anyone else has ideas to contribute ?

 

The fundamentals never change. Too many people focus on the loan and ignore yield (which reflects cashflow)

Cashflow is #1. If cashflow is poor then time will kill any investment outcome. Too many property investors take a loan and buy the wrong property. The more you borrow the worse the cashflow but if pre-interest yield is 2% you will get hammered. You are burning money. Only salvation is growth over time. If cashflows are right you can always be patient. Then the growth is a bonus.

I would argue in this environment its even more important. There are many people who signed up for OTP contracts who probably should not settle them. The property is worth less than the contract, the cashflows will be appalling (oversupply) and the cashflow loss over time PLUS the value loss mean its a poor investment that will be a burden for a long time. Better to walk away and lose the deposit than magnify it. The tax benefits wont come close to helping.

Many who invested in the USA from 2008 did so to focus on the cashflow. I was critical of this for years (and still am in many areas of the US) but it can be a sound strategy made more complex by distance and exchange rates if cashflow and yield are solid. Its an arbitrage - You dont see it in many markets but you certainly do in property. If you know the issues, risks and difficulties and can manage them it can be worth the effort to look outside your state or country.

 

Thanks Paul.

Agree on the strong cashflow. World of difference between Gross and Net yields in residential yet most investors love to brag about returns !

I am happy to be receiving 7 - 8+ % returns in a declining market for now vs losing money.

Keep the comments coming !

 

UPDATE ****

Current State of the Nation
Assets:
PPOR fully paid & Valued at $2.2Mil
IP fully paid and valued at $1.5Mil.
Investments in income producing assets - $500K
2 x Cars fully paid and worth approx. $45K combined

Liabilities:
$0 debt

Carrying Capital Gains Tax loss of $400K from previous bad investments thanks to Mr Navrainvest which we can use to offset any gains.

Income:
Well paid exec in the top income bracket.
Wife not working

Age:
Late 40's

Goals :
Exit the CORPORATE world / life. It’s been good to me but time to focus on fulfilment.
Achieve $192K net income per year to continue to fund lifestyle and work on real estate investing or own a business that does not rely only on me 100%. I am about half way there in income but need 50% more income to meet my goal and have hit a wall.

Thinking at this at options :

Option 1 : Borrow against equity, purchase know down property and build new luxury home to sell in Brisbane. Use profit to increase $500K that is producing income.

Option 2 : Look to do a makeover in Sydney. The numbers don’t stack up no matter how I look at this.

Option 3 : Buy a business.

Appreciate any more feedback / options / ideas !

 

You have $2mil in investments so if you got a yield of 10% you would be there.

 

How did you calculate the $2mill and where would you go for 10% annuity or return to live off ?

 

IP of $1.5mil plus $500k investments you mentioned having.
You wouldn't want to get an annuity though.

You would probably want to build up a bit further and use some sort of CGT harvesting strategy to achieve high income without tax, initially anyway

 

You’ve said you have $1.5 m invest prop and 0.5m investments and owe nothing = $2,000,000

Does your $500k include your superannuation?

 

above excludes super …

 

Yes - if you look at it that way …

 

Good to see some progress since your last update.

However if you've invested exactly as in the update, then it does not look to have been structured for minimising tax and maximising exposure for growth especially at highest tax threshold.

 

Need to start looking at struck again after capital losses have been eroded …

 

UPDATE ****

Current State of the Nation
Assets:
PPOR fully paid & Valued at $2.5Mil
IP fully paid and valued at $2.1Mil.
$500K in various alternate income producing investments. Averaging 6.5% return.
2 x Cars fully paid and worth approx. $35K combined

Liabilities:
$0 debt

Carrying Capital Gains Tax loss of $400K from previous bad investments thanks to Mr Navrainvest which we can use to offset any gains.

Income:
Well paid exec in the top income bracket.
Wife not working

Age:
Late 40's

Goals :
Exit the CORPORATE world / life. It’s been good to me but time to focus on fulfilment.
Achieve $192K net income per year to continue to fund lifestyle and work on real estate investing or own a business that does not rely only on me 100%. I am about half way there in income but need 50% more income to meet my goal and have hit a wall. NOT interested in purchasing negatively geared property.

Exploring -

Option 1 : Purchasing commercial property for cashflow. Can't get the numbers to stack up. Borrow at 5% and receive yield of 5.5% - 6.5% which goes against income needed for financial freedom. As soon as interest rates hit 7% I will be putting money in from my pocket.

Option 2 : Look to do a flip in Sydney. Wait for a little more pain and then purchase low and wait for market to recover before selling and offsetting losses.

Option 3 : Start a business.This seems to be the ideal one in currrent climate.

As usual ... appreciate any more feedback / options / ideas to fast track my exit from the corporate world !

 

So you have $2.6mil in investment assets atm and want to generate $192k
If you could get a 13% yield on that asset base you would be there.

 

Yep - chasing yield ain't easy !

 

I had a look at the opening post – it was 7 years ago now. Time flies.

Back then you didn't have an investment property. How did you pay off a $2.1mil property in just 7 years?
(and why did you pay it off?)

 

Various Bonus' / options / shares incentives across different organisations + savings + legal payout from claim.

 

could you do that again?

 

This may not be practical or suit your family etc.
Possible to sell your Ppor tax free and move into your ip.
Freeing up funds to invest in com property, ETF’s etc.
2.5Mil *5%=$125,000
.5Mil*6.5%=$32,500
Total=$157,000

Add your super income and you may be at your income goal of $190,000