Wealth exit strategies with property

Hi,

Newly joined member, previous member of somersoft. For my first post on this forum, I'd like to engage with people who are already there to discuss exit strategies and how you have extracted wealth from your portfolios. The two main ones I can think of are live of rent and live of equity. Obviously you could also liquidate the entire portfolio and have cash, but that would be a bit inefficient, cgt heavy and growth adverse. I'm only starting out with property, 2 in the kitty, but want to begin with the end in mind.

So, live of equity or live of rent? On paper, LOE makes more sense due to tax savings if the portfolio is strong CG. The sticking point is how do you keep getting the lender to unlock more line of credit and how do you pay the interest on the loc? LOR practically is easier, just sell some properties to get your LVR down to a suitable level or repay all debt and then collect rent. The trouble I see with this is, because this is realized income, it is tax ineffective. If you want to collect say 200k plus p.a from rent, tax man is taking a fair chunk. Where as with LOE, funds are unrealized. Both methods allow depreciation phantom cash, so further swings in favor of LOE. All wealthy people get richer by minimizing tax, therefore LOE looks a winner, but can it be implemented reliably and sustainably? What needs to be done structure wise and other matters to achieve? Do you need to supplement with other income, such as rent or businesses to unlock more loc?

Cheers
CJP

 

I've never been able to understand how you can LOE long term. As you said how do you keep accessing equity without income? Maybe we just never had that penny dropping moment. Maybe @Rixter can explain.