What 'mode' are you in?

Likewise.

 

Do what I did and buy in the other half's name until I'm ready to go again.

Look at the bright side, we'll have lots of juicy equity to use upon our market return

 

First I voted debt reduction, then realised I could vote for both growth and debt reduction so voted for both then decided that I'm just concentrating on debt reduction and renovations for the moment so just voting for that. Hope to keep going with current strategy for the next few years. Don't even know if I can buy again yet. Think I can if it's a cheapie.

 

How about "Growth (development)"?

Next year if all goes to plan, I will be building two townhouses behind an existing house. My portfolio will grow from 1 IP to 3 IPs.

 

i just bought this instead.

 

I voted growth but realised technically in 2016 I probably won't be buying at all.

Reason being is, I'm in negotiations on a final buy now, that will probably settle in the new year.

After that, I'll require either a salary increase, am APRA easing, or perhaps both, before lenders will give me more money!

But this is a good thing. I'll use 2016 to hopefully build more equity in the portfolio, because come 2017-2018 I believe there will be great buying ops in some markets that are new to me. This means that 2016 will simply be a year of heavy due diligence, so I can strike quickly when the buying ops present and when the lenders will talk to me again

 

Have paid off my PPOR, have grown a portfolio worth in excess of $6 Million, with sufficient deductions and NRAS surplus CF to generate (conservatively) @280-300K tax free per annum across the next decade.

Will now focus on building my Super balance aggressively and reinvesting the majority of the rest of that cash flow ,so that in 10 years I can clear all ( or most) of the debt, leaving me with a significant passive income for life of anywhere between 200-250K after all costs, depending on rental inflation across the next decade, and growing annually with rental increases thereafter, plus a very healthy Super balance with years to continue to grow before pension phase...

Even if I do nothing more, at 42 I have positioned myself to have a significant passive income for life without ever having to sell any of the portfolio, which to be honest, can take 20+ years to double for all I care. In fact, as the portfolio costs me ZERO to hold and makes me huge annual tax free surpluses, it can make ZERO growth and still leave me with $6million in assets and zero debt.

Of course, like anyone I'm hopeful of growth (even if it's slow growth), but with just 50% growth in the next 10 years I will be sitting on $9Million + in equity and zero debt, and the platform for that result has all been achieved with just 12 properties and in just 3 years.

# NOT DONE YET

 

Safe mode with networking.

 

I only have one half, so will be waiting on the sidelines

 

Buying. Another 3 or 4 next year.

 

We bought our first IP two weeks ago. Waiting till I change jobs which would significantly increase my income so we can safely buy our second IP next year. So technically, in consolidation phase (after 1..haha) but hoping to move to the growth phase again soon.

 

Teach me your ways!

 

Growth phase, looking to purchase that next property.

 

Growth, as I only just started.

 

have been trying to do that for several years The secret is NRAS, and the multitude of multiplier effects it creates. I have approached it as more than just a property investment. I have approached it as a mortgage reduction/ dividend reinvestment plan using property, negative gearing and NRAS credits to minimise my tax, maximise my cash flow , aggressively reinvest the dividends in non deductible debt reduction and get significant ongoing compounding multiplier effects from that, as I outlined in my earlier post.

It's fairly straightfoward.

PRE TAX- Each NRAS property produces 18-20K of deductible losses on average, from pre tax losses of 8-10K , which are the result of the 20% reduced rental income, and depreciation, which is typically 10K+ ( although it does start to diminish after then 6th and 7th years. Some of the more expensive ones produce larger deductions because the pre NRAS market rents are less than 5%, but the average , if you work on a theory of 400K median purchase prices , is @ 18-20K per property. I have purchased enough NRAS properties ( some dear, some not so dear) to produce sufficient deductions across the portfolio to pay zero tax on 200K salary.

POST TAX- Each NRAS also produces 8-10K of surplus tax free money. This is the result of negative gearing + the NRAS tax free credit. This amount can vary depending on some variables, such as marginal tax rate. And because the NRAS credit is the same amount for a 300K property as a 600K property, obviously the less expensive ones produce larger surplus amounts, and the more expensive ones produce smaller surplus amounts - But importantly, they all produce tax free CF+ outcomes to one degree or another.

Certainly for higher income earners the results are assisted by negative gearing being available at higher marginal tax rates, but even lower income earners ( say 60-80K) can generate 5-7K CF+ on average per property. In my case, I have purchased enough NRAS properties to produce at least 100K CF+ tax free. And across the next decade that amount will increase in line with rental CPI, so by the 8th, 9th, 10th year the figure could reasonably be expected to reach 14-16K tax free surplus per property.

The approach I take is simple; If you earn 100K taxable for example, you would want to be looking at @ 4 NRAS properties - subject to borrowing capacity and available equity ( to pay for deposit, stamp duties and cash flow buffers - I always use a 10K cash flow buffer for each property) That approach would provide for @ 72-80K ( based on 18 -20K per property) of deductible losses, reducing your taxable income to low 20K range, meaning your tax bill would be effectively zero, or very close to. And you'd also see surpluses of anywhere between 5 - 10K per property, depending on the variables mentioned above. ie with 4 less expensive properties the returns would be higher than 4 more expensive properties. You'd also be taking on less debt with 4 less expensive properties, and using less equity to fund deposits, stamp duty and buffers. So conceivably 100K taxable could be converted to 130-140K , with little or no tax to pay, with 4 x inexpensive NRAS.

Then, once the "system" or "cash flow" platform is built, it's simply a matter of reinvesting the massive tax free surpluses towards paying down your PPOR- FAST! Reinvesting the surplus from just one NRAS property will pay down a 300K mortgage approximately 15 years faster and save @$133K in interest - based on 4.5% P&I . For a 450K mortgage at 4.5% P&I , 12 years saved and @ 165K in interest saved. Multiplier effect. Imagine what 2 will do. or what 3 will do... or what 4 will do...

I paid my 440K PPOR debt off in a little less than 2 years. That aggressive repayment of the 440K mortgage has literally made me/saved me hundreds of thousands. Measurable in saved interest, and immeasurable additional value in providing me with the equity and borrowing capacity to purchase and repurchase and repurchase... yet more multiplier effects
The $2.5K pr month I used to pay the bank is no longer required or that purpose. Now it's available instead to use elsewhere. Another multiplier effect.

For those on higher incomes..same approach, except they can , in theory do a little more, or a lot more ( as I did) - subject to their available capacity and equity. In my particular case, 200K taxable required 181.8K of deductible losses to reduce my taxable income to 18.2K, the tax free threshold. So 9-10 NRAS properties basically does that job. My portfolio produces slightly more losses than I can actually use, but as the depreciation diminishes little by little the losses will also diminish little by little, and across 10 years I will effectively keep my tax bill at zero. This is one of the reasons its ineffective for me to continue buying too many more properties at this point, and why Im now going to start reinvesting the surpluses elsewhere, with a view to clearing the debt after 10 years, when the properties revert to full market rent and wont offer much in the way of deductible losses thereafter...

If I choose to, I can obviously at that point go and expand the portfolio by another 10-15 properties quite easily, as I will have both the equity and the capacity to do so... and if structured intelligently I'll actually be able to make some use ( ie take advantage of) of the tax man again 10-15 additional properties would quite likely provide significant enough deductions for me to write off large amounts of taxable income being produced from the first 12 properties, which would by then be completely debt free.

Rinse. Repeat. Rinse. Repeat. ie Dividend Reinvestment Plan /Multiplier Effects

The hardest part about all of this is swimming against the tide... most experienced investors have enjoyed success across 20+ years using the buy, hold, realise growth, go again approach. They will no- no the NRAS concept. They will pot shot it. But I've caught and passed the overwhelming majority of them in less than 3 years, have superior cash flow than most of them after just 3 years and using far fewer properties and far less debt, and have assured myself of a remarkable outcome in just 10 years even if Im unlucky enough to get zero growth, so I think if we are comparing apples with apples, and outcomes with outcomes, there's a significant amount of merit in swimming against those tides

 

The first step is the hardest. Well done!

 

Thanks mate. I'm pretty risk averse so put in a years worth of research plus used a BA in the end. Next one will be solo though!
And it appears you're sitting on a good wicket - nice work.

 

At this point, making sense of my finances/debt recycling, accumulating some buffers, increasing income. But otherwise, I'm trying to solidify goals, and then back to growth!

 

I tend to do the opposite to what people are doing in the market place, So I will be keeping an eye out but most importantly I would look at buying another development site.

 

Coolness!
One of the XP Falcons was the Batmobile model, what's that one?