What's your Exit Strategy

Then what's happening if no crash?

 

Trading forex. I love it.

 

So no property either way..

Back to topic

 

@@eng - something else that worked for us, was to map out in Excel the possibilities..

Say if you have a $2m or $3m or $10m portfolio - what does it mean based on 5% growth, 10% growth over say the next 10 years. Similar to what @Befuddled is suggesting. It gives a lot more clarity on where you are heading & what if you decided to increase or decrease the holdings & the impact of this decision on the bottom line. It's interesting to do this exercise, especially when you don't know what to expect with a rising market.

 

Roughly sell 4 to pay out 5.

 

Great post, I'll be following the responses to gain as much insight as possible.
The exit strategy or 'end game' as I like to call it confuses me. I can see how accumulating all the properties is going to be great for overall wealth but can't see how that translates into cashflow for an early retirement or lots of holidays.

I'm in a similar age bracket @eng, have been creating my portfolio over the past 2.5yrs and have 5 investment properties. My acquisition is slowing down now as I'm waiting for more equity to develop but hope to buy another one in the next 12-18mths.

Until I learn some more from this forum my exit strategy is to probably sell a few properties to pay down the rest of the portfolio as that's the only way I can see how I'll boost my cash income in 15yrs time when i want to wind back from my payg job.

Look forward to lots of great ideas and will have to look up @Travelbug's story

 

We're young so time is on our side. The goal is to be in a position to allow one of us to quit the rate race in the next 12-15yrs, with PAYG income replaced by rent. This would require roughly 2m of equity. It doesn't matter if we have 2.5m in loans offset by 500k cash, as long as debt-savings is roughly that number. Eventually both jobs may be replaced but don't want to assume too much at this point.

Our whole portfolio is in Sydney so realistically the time frame will depend on when it next booms. I anticipate we'd get most of the way to the target just by sitting on the current portfolio but don't want to sit on our hands and wait on the 1 market to boom again. We have a bit of room to acquire more so looking at spreading to SEQ. Finance permitting we're hoping to pick up 2 this year, mainly looking at areas with consistent historical growth.

Yield is great but needs to be looked at in context. Suburbs with historically high yields tend to have higher percentages of investors, who tend to flock to and leave the market depending on where the cycle is at. As a result these areas tend to experience very spiky growth during booms and then completely flat-line or even decline when the boom ends. I prefer boring, consistent growth over a long period of time. Aiming for that happy medium between growth and yield.

Once we've had enough we'll quit our jobs and slowly sell down the portfolio to increase cash flow to live off.

 

Not sure if it qualifies as an "Exit Strategy" but the plan is to LOR (Live On Rent). No planned sell-off.

Edit: Oh, and other investment income as well - business, shares etc. But forecasts indicate that the majority of our income will come from rent.

 

The general plan is :

1) Next 5 - 10 years (max) : Keep working until kids are financially independent (of us).

2) Following 10 years : Live off superannuation income and capital until it runs out.

3) Following 10 years : Downsize PPOR if necessary and live off capital.

4) Property portfolio to top up the above and act as a backup plan.

We have a good property portfolio that has performed well (mainly good Sydney locations) - but it still doesn't put cash in our pocket despite all being dual occupancy (eg granny flats). There always seems to be something to spend on them. Most of them have been through a full cycle now.

To date any equity we have pulled out has been re-invested in property (Brisbane).

While at some stage the properties should generate cash flow and also give off some equity to live off - we are not convinced enough to have all our eggs in that basket.

 

I think the exit is referring to the Rat Race, rather than exiting the Property Investing game.
Why would one want to sell good appreciating assets if they are providing substantial growing income.

 

Yes, agree.

I guess my answer still stands, then - we will retire from the day jobs once we're comfortable with the level of net rent/investment income we are receiving.

 

Tonibell - I really like your thinking.

 

No, no property. Had enough.

 

Exit strategy. Continually changes as the years and scenarios change. live off super, and rental properties if I'm still alive by the time I hit 50. Ppor is paid off.
Current strategy, sell one house. sell anything not performing. Continue to save as much as possible. Waiting for the crash to occur. And buy up big if it does. If it doesn't crash, keep saving and do another subdivision later.

 

Goals are
Hit 150k PA in net rent, PPOR debt paid off (can be reborrowed but no non deductible interest), enough cash to play in smaller developments buying outright then converting to commercial loans with presales.

Our numbers say about $2m to $2.5m in income producing assets, plus about $1m to $1.5m in tradable cash.

Not even remotely close but we did run the numbers last week and realise that with our first development nearly complete our net rent replaces about 2/3 of my wifes income.

 

But you can't get Super at 50. Considerably later for most of us.

 

Correct. Rental properties should generate around 100k from 50 onwards. Then super is the bonus.

 

The last two statements have me worried......if you have pulled out most of your equity and reinvested...what is the strategy to de-leverage?

15 years is a looonnggg...time....the number one reason people are forced to sell is cashflow....

 

Great suggestions thanks @MsAli

You're not the only one @lisawithane
However, I'm not too worried about the bigger picture. For me, it's about taking action now and trying my best to learn as I go. I think over the few years you'll eventually deepen your understanding, and you'll be able to figure out what works for you.

 

We still have a relatively low LVR and a good buffer in the offset - as well as an adequate income.

At some point , I guess, we will sell to de-leverage and extract the equity in the properties.

So far we really have just been extracting the equity from our PPOR and investing it in property.
Overall the portfolio would be about cashflow neutral and just ticks along.

As long as there are no dramatic changes in employment - the cashflow should be fine.