Thank you for the Growth.........It's Time for Cash Flow!

I may have to sleep in cargo soon if property collapses

 

Yes I haven't actually done it so we'll see whether I can actually pay those prices. My hubby is over the long flights. So It will just be one fare. For the next few years I get staff price so have experienced business and hopefully get upgrades. It's rare though with everyone uding points to upgrade. It's another world.

 

Premium economy is the sweet spot for me - business class food and wine (on Qantas), dedicated cabin crew and enough recline to let you sleep.

 

We went Qantas BC, Qantas Not a scratch on Qatar
View ratings. There is business class and there is very ordinary business class

 

Was lucky enough to fly First on long-haul flights several times when I worked for an airline. Those were the days when staff were given perks well beyond their pay grade. I was pretty young as well (mid-late 20s) and was so undeserving of the right.

Had some surprised, bemused looks (mostly from the wannabes in Business) as I turned left towards the front of the plane. The people flying First though - the ones who can afford to pay, were surprisingly chill. And they don't all dress like they're flying First. I guess once you've 'made it', you've got nothing to prove.....unlike some of the fakers and the perceived rich who were in Business class - dressed to the nines with suits, sportjackets, crisp blue shirts and beige chinos, and always looking important.

Never saw anyone famous in First except the actress Mary Steenburgen (reading a script on the flight) when I was doing a domestic leg in the US.

 

PJs (3 sizes) and slippers on Business Class….a nice gift….True
Qatar, very comfy.

Great idea

 

Not sure how old you are @Player and how much you have in super but I personally find the conundrum of how much to sell to retire early (pre 60) and do so OPTIMALLY virtually unsolvable.

I'll assume you're closer to 60 than 35. Let's say you and your partner's super balance will generate $40K pa in today's dollars (at 60). You need say, $80K pa for living expenses + travel. You also have a paid off PPOR. You don't want to start a side hustle, business etc.

I think one only has two/three viable options:

1. Sell enough IPs now to generate the required $80K pa via dividends till 60. But doing that will lead you to overshoot the target at 60 when you qualify for your super. You only need $80K not $120K and by selling more now to cater for early retirement, you've had to technically 'oversell' your property portfolio. Nice problem to have but a 'problem' nonetheless.
2. Sell enough IPs now to generate $40K pa (knowing you'll have an additional $40K pa at 60), and live off proceeds of other IPs to pad the $40K gap till you hit 60. You'll end up selling less IPs by living off equity/proceeds but consuming capital doesn't sit well with me either.
3. A hybrid of the above

Assuming you went down the shares option, which of option 1 or 2 would you adopt?

 

Yes I can relate to that - about to start traveling again, and recently booked 2 trips Europe - Sydney return on QF. Did the search on business class - but in the end just couldn't justify 6000€ business vs. 2000€ economy. Mind wandered to what I could invest the 4000€ difference per trip in... and thus bought the economy tickets. It's $12k extra invested...

Although I have had good success with points upgrades - I've got the upgrade for 9 of the last 10 flights. Having platinum status and buying fully flexible economy tickets means you are at the front of the queue if a points upgrade is available. Plus I user experflyer.com to check the flight loadings and move my flights to those that have good business availability to maximize my chances.

 

Or you could borrow some funds now either against the IPs or PPOR, up until you can access super. Borrowings against the IPs won't be deductible though.

We are in a similar situation. I'm retiring this year, but we can't access super for a few years.

So we have accumulated shares outside of super, as well as cash-flow positive property.
Will sell one of the properties next year to help fund any top up required, and tip the rest into equities.

Wife and I will also keep doing a little bit of PT / consulting work to keep us active and interested.

 

Yeah - kind of the ol' LOE model till you have sufficient cashflow. Unfortunately in my case, I'm maxed out borrowing wise and have been since 2015.

 

Wouldn't you have equity growth in those properties??

 

Yes of course....but I don't pass servicability hurdles.

 

Have you investigated low doc option? Using abn and accounting signing off on this

 

Properties are mostly in my/partner's name and we're PAYG.

 

Ok
Bummer

 

Age assumptions are correct. Haven't started a super pension yet from our SMSF. Haven't clocked in for well over a decade. Issue is cashflow dwindling due to expenses of running the IP's. Net operating income going down the toilet mostly due to land tax and insurance. Also needing to allow for capex for older land rich properties to comply with "minimum rental standards" in Victoria and to be mirrored in Qld from Sept next year. The sell down notion is to free up capital gain for commercial investment and also dividend income from equities. As one accumulates birthdays it is also a bonus to not have too many residential tenancy headaches moving forward. The numbers you have posted are not relevant to my wife and I as the income we derive and wish to derive in the future are considerably north of the income scenarios you mention.

I still think it is desirable to have some residential property exposure over and above a PPOR and preferably in diverse entity ownership and/or states. Assets rule for wealth irrespective of the miniscule cash flow. that residential property provides. Get a balance. If you can hold some property (resi and/or Commercial) and have a growing exposure to direct shares or indices and receive digital rents so to speak, that would be ideal.

I have come to appreciate that residential IP's in an SMSF need to eventually be harvested to equities to comply with minimum drawdown requirement when in pension phase. Bonus is far fewer headaches from tenants, legislative requirements, toilets, leaky roofs and whatever other imposts will be applied to ensure that investors in the residential space are punished to the point of conceding.

If you can achieve this with a hybrid scenario with a bit of both to capture the leveraged growth that residential property provides, then well and good. If, not then I would opt for pure equities in whatever flavour you desire, whether stock picking or keeping it easy via index ETF's.

Simplification is the end goal.

 

I hear ya....this bloke is my poster child.....

 

Terrific thread, Player,

Must echo other’s comments regarding Player and how generous and genuine he is in sharing his extensive knowledge.

Thanks for your support and help over many years.
As we all know, investing is not easy with many different choices and decisions to make. Player has been a terrific sounding board and so generous with his time for my family and I, for which I am most grateful.

In relation to the post, we are building up an income via index funds and will retire with a hybrid portfolio consisting of resi property and shares/index funds held in a trust.

Super will be the icing on too invested in etf’s and lic’s in a smsf.

Property may end up being debt free if we decide to sell down that far.

Running costs of resi ip’s is extensive and the need to consider other investments is necessary I think.

 

Time for you to own a lessor's interest
[the reverse of this listing]
https://www.domain.com.au/news/live-for-the-moment-20110408-1d6j2/

 

@Player one year on from this fantastic post. Care to share what you've done since to achieve your goal of converting the equity into cashflow?