what buffer do you keep

We have fully owned PPOR and weekender ( as a result of profits from last cycle ) which have LOC's on which we draw down funds for investment purposes . We get an investment loan ( 80-90 % ) LVR secured by the new property we are purchasing and then draw down funds from the LOC's to make up the difference .

Post GFC we used the LOC's to purchase properties outright at a time when banks were incredibly reluctant to lend anyone money .

cliff

 

so you actually have IPs?

 

Lots of buffer, my missus is very conservative so we just pull out all the equity and put them in offset account.

 

How does that work? You pull out equity (means you set up another loan), pay interest rates and park it in the offset to less interest charged?
I hope that the offset is not against your ppor, else the interest will not be tax deductible.
This is my understanding. I could be wrong.

 

I think he means he reval a property after there is enough equity and transfer the available funds into the related offset

 

Yes . A few .

Cliff

 

I have separate offset against my equity loans, and I park the money there.

My PPOR has its own offset. My equity release money never goes there. This is to prevent mixing.

 

I know where you are coming from. 2 years is a big buffer and not necessary for most people. However I am in the process of changing careers and pay could possibly be reduced so that is why I have that big of a buffer

 

If you get a new loan, nothing saying you have to spend it straight away, the drawn down amount can sit in offset, in fact that is exactly how some lenders do this, if you do not use the cash, then it costs nothing

 

If your IP s are positively geared, does this mean you have a infinitely massive buffer against your debt (assuming your expenses don't rise exorbitantly)?

 

Hyock hyock, I see what you did there.

 

and I was thinking why is there a floor polisher posted in the thread

 

I thought that at first too, when did the conversation change to floor sanding?

 

Not in my opinion. Wealth could be defined by a time frame ie how long could you survive without going bankrupt if you lost your job.

For example if you had $120k of available cash and your total outgoings are $5k per month then your wealth could be measured as 24 months survivability. A positive cash flow investment will add to that wealth measurement but a shift in interest rates could negate that cash flow so to answer your question, in my opinion no not unless your outgoings are covered by your incomes completely.

 

It's a buffer not a floor sander (didn't you notice that the disc is different?)

 

What if that property is vacant for 3 months?

 

I keep $5k per property in the safety of cash.

Then any excess funds in the offset and have some defensive shares to draw on in $5k parcels.

Has worked pretty well for me so far... Going through my first vacancy issue in 4 years and all going well so far... Will report back in a few months and provide an update if the property still isn't tenanted.

Cheers

Cash Flows

 

My solicitor said to me ages ago, 'luvvy, I say this to you in an avuncular way, a girl needs $40,000 in savings..'
I had to go home and look up what avuncular meant in the dictionary...
Since then, saved it up, but it really works.
I recently had to do more travel than I would have liked. Job done. I hope this helps!

 

So a bucket of coins in the cupboard doesn't count?