what buffer do you keep

I cant agree more with this. My investment is bullet proof as I am not comfortable to take on more leverage. It's combination of the entire economy and the high expectation of investors by having more leverage that worry me the most. Even though having big portfolio is very tempting, my personal suggestion is to take your own pace with your investment as everyone is having different situation.

 

Is this attitude stopping you from aquiring a six figure networth? If you stop making cash you won't have that buffer for long.

Not trying to knock you, just trying to get you thinking about the consequences of your views on money etc.

 

lol...its ok, you are from adelaide so a net worth of 5 bucks is around average. Im from brisnane, so an average net worth of around 10bux is average for us.
Its only those mexicans who have 100k++ in pure cash to burn at any given moment.

 

How do you figure? At a 5% rate of return I could live off of $300k almost indefinitely

 

All my clients borrow their deposit, stamp duty + buffer from equity. Typically the buffer is @10K, but sometimes only 8K is required, and sometimes 11 or 12K is required, depending on the property. Then the balance is borrowed against the NRAS property. This ensures the pre tax loss is covered, and little or no contributions are required from the investor. ie ZERO out of pocket costs. This protects against periods of injury, illness or incapacity for up to 12 months.
At tax time, when the combined ATO refund and NRAS credits are accounted for, the investor receives more than enough money back to replenish the buffer and still be left with a surplus of anywhere between 8-10K tax free. So it is a self contained model that is impervious to 12 months unemployment.

The NRAS legislation itself adds a further buffer that non NRAS properties cannot. It allows for the property to be vacant for 91 days ( 13 weeks) and the investor will still receive 100% of the NRAS incentive, and it allows for the property be be vacant for between 91 days ( 13 weeks) and 182 days (26 weeks) and the investor still receives most of the NRAS incentive. Try running a non NRAS property that has a vacancy of up to 13 weeks, or up to 26 weeks , and keeping your head above water... NRAS investors can.

The 20% reduced rent is a further buffer - but against competition for tenants. NRAS is not a rental guarantee in any way. It is not DHA with 9 or 12 year leases. It is not a developer rental guarantee for 2 or 3 years. No such rental guarantees exist with NRAS ; owners must compete for tenants like anyone else in the open rental market. However, it does put investor owners at a significant advantage financially. Think of it like this; as an owner of a non NRAS property, would you rather be competing for tenants with someone charging full market rent, or someone charging 20% reduced rent? Or think of it like this... as a non NRAS owner, if you dropped your rent $60 or $80 a week to try and compete with the NRAS property near yours, to try and retain or attract a tenant, you'd be bleeding cash flow, but the NRAS owner can easily reduce their rent lower than the minimum 20% rental discount required by the legislation, and stay easily CF+. They can essentially drive you out of business, so to speak..if it came down to it. The NRAS owner has a distinct financial advantage over non NRAS owners in this regard.

The tax free surpluses generated annually by NRAS , if reinvested into offsets for debt reduction, create additional equity buffers and debt reduction buffers year after year.

 

15K per year? 5% of 300K?

 

Not impossible for a young single person (with no rent/mortgage). Acquire a family and the theory breaks down.

 

I figure from you said you would quit your job and now that you could live off it "almost indefinitely". Hence my conclusion is (including new information) that from the day you quit you would be moving further away from indefinitely (retired) and moving back towards having to work, especially thinking about inflation.

To extrapolate my line of thought is that the almost retired point is unlikely to reached if someone plans to quit the moment they get close to indefinite retirement and is likely to spend before this point is achieved.

I am not saying that this applies to you, just thought it might be helpful to think about. Impressed you can live off $15k a year.

 

You are absolutely right. That 15k a year is just a milestone. It would be a huge weight off of one's shoulders to not have to worry about losing their job. Id rather go to work because I want to, not because I have to

 

150 gs cash and lvr below 5o% im risk adverse to the property game. the feeling of huges debts would weigh me down and makes me feel like a slave to the banks

 

Haha this is funny.

 

Joel, you're on a property investors forum. My advice is to adjust your end goal to be something much higher. I can't see myself comfortably living off the rent off one house. While you may say you would be capable to live off 15k per year you'll be forgoing a lot in retirement. Start building your capital, and the equity should start to really compound if you had bought well. Owning a portfolio of properties all doing their bit to contribute equals a lot of equity over time...

You have time on your side. Aim high!

 

I have a couple years buffer. Playing it pretty safe but never know what might happen

 

Joel, you're on a property investment forum that is going to provide you with an incredibly huge amount of experience, just by you investing, and feel free to throw Sim a few bucks if you like, a bit of your time every so often.

And, in so many diverse aspects of property and it's nuances.

Aim for say, a multiple of your 15k per year nirvana, through some shrewd and canny moves you can benefit from, what some old American guy (who is still alive and has a meetup once a year in Omaha) many years ago referred to as, "Sit On Your A&rse Investing", where you purchase an asset, and over time, it pays you back in spades.

What's not to like?

 

One of these guys might have a six pack now, but in a few years will probably have the whole carton.

And I don't think it's going to be Warren.

 

I spend that on toilet paper lol

 

Exactly.

 

That's a bit harsh
Everyone is different to their own
@joel Joel, it's the start, not the end. Good work

 

I was just joking obviously.

But to aim for retirement of $300 per week is pretty weak.

 

@Johnny Cashflow - all cool. all respect to all experienced investors here.
for starters like us, all "small" achievements are big milestones for us.. start dreaming of "retirement" but of course its only the start...