Whats your strategy to become financially free thru propertie ?

Whats your strategy to become financially free and escape the rat race ?
I would like to see everyones different ideas so I can get an idea on how im going to do it lol
Thanks!

 

I would be happy with 50-60k after tax pa

 

1. a. Growing business to point where I no longer work in it. Only on it.
1. b. Once I am more confident with understanding businesses and their intricacies, I will feel confident investing into more of those, until then there is the much safer (2) ...

2. Acquiring property that are A grade, not relying on market rising but rather relying on opportunity to manufacture growth or uniquness (e.g. development, major renovation, zoning change speculation, uniquness in the area)

3. Leveraging. Not just leveraging money.

4. Compounding. Not just compounding money. Experience/knowledge/talents/network can all have a compounding effect if you work on growth.

 

Just Buy and Hold positive yielding properties

 

All of the above posters so far. let's keep working it...

 

Creating cashflow through properties, shares and biz.

 

1. Buy non-competitive areas. Everyone's building an apartment block. Buy a shop underneath it an lease it to a supermarket.

2. Buy close to key infrastructure. They aren't building any Sydney Unis or Melb Unis again. Or MCGs or hospitals.

3. Diversify and build a business (I have a funds business that does anything but properties)

 

1. Continue to buy all massively bmv deals in good projected growth areas.
2. Buy deals where I can manufacture large chunks of equity through subdivisions, reno and development.
3. Continue to help my partner grow her accounting company so we'll have two main companies to focus on, development and accounting/financial modelling.


That's it. At the end of the day the more equity we can create the more lifestyle options we have. For me its 100% about building large chunks of equity asa-bloody-p.

 

Used to be buy and hold, make the properties cashflow properties asap through improvements and offset.

Now, the above, however once I have enough buffer to keep the property floating on +cashflow, will start directing the surplus towards shares. So future income would be from dividend + rent instead of just rent.

 

Maybe a property trust that invests in the next wave of emu farms and olive groves could be worthwhile, supplemented (and buffered...) by a venture where some uni students are hired to write some black box software to predict the outcomes of horse races?

 

I read once there is a market for retired folk to sit on a beach in Bali or Thailand and teach English over the internet. I have also been told that one fully paid for house in Australia will provide enough rental income to finance the cost of living on a beach somewhere in South East Asia.

 

A number of things:

1. Buy CF+ properties with future development potential in areas where there is evidence of population growth and gentrification
2. Debt-recycling strategies supporting property + share investments whilst also maximising PPOR offset
3. Pumping spare cash and additional savings from home loan interest rate cuts towards topping up share portfolio
4. Progressively build asset base and additional income stream through shares ( to improve serviceability in the medium term for property investment )
5. Manage risk - Gradually reduce LVR across the portfolio, adequate buffers, landlord insurance, income protection insurance

 

don't fully know yet. Probably a bit of many things- work, shares, property, funds.
Boss recently told me he wants me to succeed near retirees in the company in the next 3-5 years. Dunno how I can do that- they are about a full generation elder to me.
Actually... if Bush Jr. can succeed his old mans position, I can be the bludy CEO

 

NRAS. Dividend Reinvestment Plan using property rather than shares and resi loans rather than margin loans, and 90% gearing if you wish, rather than 60% gearing.

Lets run a scenario, assuming you earn 100K per annum. Let's say you have @ 260-280K equity available. Let's say you have the ability to borrow @ 1.7 million ( which is inclusive of the 260-280K of equity you draw down , plus the remaining @1.44 Million you borrow to complete the transactions below)

For anyone with that capability, here is what I would propose is a superior strategy to anything else available to them today, with the exception of extremely risky investments in assets that present genuine risk to their capital.

I'd be buying 4 x NRAS properties to the value of no more than @ 400K each.

My contribution for each property would be an 11.5% deposit +_stamp duty + cash buffer, for a total of @ 65-70K of equity deployed per property. This is where the @260K-280K of equity comes into play. It is used for the seed costs - ie 4 x 65-70K amounts.

I'd then borrow the remaining 88.5% + LMI , otherwise known as 90% (360K) to complete each purchase. Total end debt per property would be 425-430K. This is made up of 65-70K of equity from PPOR, plus 360K secured by the INV property . This is where the @ 1.7 Million total borrowing capacity comes into play . ie 4 x 425-430K amounts

If this borrowing capacity and this equity position is available to you, here is the impact it will have

Each NRAS property will produce approximately 18-20K of deductible losses, pre tax. Approximately half of this is from pre tax cash flow shortfall, and the other half is from depreciation. Your negative gearing + NRAS tax free credit of $11,048 will then see you generate @ 8-9K tax free per dwelling after tax. Confirm this with your accountant of course, but the numbers are accurate.

Now, do the same maths x 4, and you'll realise I just showed you how to deploy 260-280K of dormant equity and achieve the following;

1. Reduce Tax.
2. Increase Your Net Income.
3. Pay off debt fast.
4. Build a portfolio.
5. Zero out of pocket

Reduce Tax. 100K taxable income has been reduced to @ 20K taxable income, because Ive just show you how to generate 4 x 20K ( 80K) deductions . So you are paying almost $0 tax on the 100K .

Increase Your Net Income . Your after tax income increases by @ 32-36K , because Ive just showed you how to generate 4 x 8-9K tax free surpluses. ( 32-36K)

Result = 132-136K tax free, instead of 100K taxable......

Pay off debt fast. Now to the dividend reinvestment plan. Take the 13% ROE /surpluses /fully franked dividends I just showed you how to generate, and reinvest them in debt reduction, to generate further compounding returns. Rinse, Repeat. Each Year. For 10 years. That's over 1.32 Million Tax Free Dollars generated over a decade.... and a truckload of interest saved by reinvesting the surpluses....

Build a Portfolio - well you already own 4 properties , and you have used them to pay off your PPOR...so now you have equity AND borrowing power with which to grow.

Zero out of pocket Oh, and you also own 4 x properties that are costing you zero to hold. They are CF+ tax free



Or looked at another way. If you're a share investor kind of person, I just showed you how to deploy 65-70K of equity , borrowed using resi 30 year terms , and not at call, into an asset that delivers you a fully franked dividend of 8-9K tax free , or 13%+tax free....


Reduce Tax. Increase Your Net Income. Pay off debt fast. Build a portfolio. Zero out of pocket



So that's my strategy. I have done it. Many PC members have done it. I'm sure they would be happy to tell you if you ask, about the very large inroads they are now making into their mortgages, and how they can clearly see that they will be able to escape the rat race within a decade, with no mortgage and a property portfolio running well and truly under its own steam

There are others here who will poo poo NRAS - no amount of mathematical logic can sway them from their paths - but what's taken many of them 15-20 years to build (large portfolio's with 6 digit passive incomes) I've done in less than 4 using this fantastic tax free cash cow.

 

Can you still buy NRAS properties?

What would you do in the post NRAS environment?

 

You can still buy NRAS properties if you ask the right people Who might you know, that you could reach out to???

Post NRAS??? well, I have a portfolio that is now built... and so do my clients... so further accumulation wont be necessary in our personal names... That's not to say it wont be pursued, I'm just saying most my clients have purchased the precise number of properties required to achieve the kinds of outcomes I have written about above, in their personal names. We were quite strategic in employing the right lenders in the right order and purchasing at the right price points to ensure all the juice could be extracted from the lemon, so to speak. For many of them, the need or ambition to continue to accumulate in the near term, is quite low. They want to sit and let this strategy start reaping benefits over the next few years, taking advantage of low rates to deleverage themselves.

But post NRAS, I'm looking at dual occ opportunities . Done at the right price points, they can go very close to replicating an NRAS property, so for those with some capacity left over, or who think this dividend reinvestment theory of mine actually makes a lot of sense in this post APRA world but who have procrastinated and suffered analysis paralysis while the rest of us have built a fool proof passive income for life in waiting , perhaps they will like dual occ instead of NRAS... and factually do something rather than procrastinating... who knows..

I have also been very careful to stay away from SMSF with any of my clients... we wanted to be very focused on maximising personal outcomes first, and now that is pretty much done, it may well be time to start talking about how to use this same dividend reinvestment plan via property but within an SMSF , using dual occ rather than NRAS. Done at the right price points within an SMSF, the surpluses + member contributions can pay down a 70% LRBA facility within @10 years, allowing the fund to have grown its asset base by at least 300% just from the leveraging, and without requiring any growth. This will also address the issues around non concessional contributions being limited to 25K per annum and 500K for a lifetime. Earnings from within the fund are not non concessional contributions.

Take a 500K dual occ that is a 3 bed + 1 bed, generating 650 per week in rent

I borrow 350K at 5.5%. Repayments are $19,250 annually. Add 4K for rates, insurances, management etc. Total cost @ 23.5K per annum

Rent = @ 33.5K per annum.

Pre Tax = 10K CF+, which would be taxable at 15% MTR

But when you offset depreciation ( which will exceed 10K for the dual occ) you'll be in a negative position. But lets just call it evens, and assume a 10K income is generated after tax.

Assuming member contributions ( from 2 members) of @ 20K per year combined , and after tax surpluses from the property of @ 10K per annum , 30K per year can be paid into the offset, and the loan would be paid down in @ 12-13 years. Allowing for rental inflation, this will likely be closer to 9 or 10 years. Thereafter, with 100% of the LRBA facility offset by monies in the offset account , the property will become a cash cow , generating rental income as earnings, rather than contributions... earnings that avoid the lifetime cap. If the rents achieve just 50% growth over the next decade, $650 rent will be close to close to $1K oper week in 10,11, 12 years...thats 50K of additional income being generated into the SMSF , taxed at only 15%. Pretty compelling stuff.

And just like NRAS, its not the CG Im after, its the debt reduction which leads to the passive income ...

so yeah, thinking about how all that might work best, and that's probably the kind of thing I'll be doing next. I have the builders who can deliver these properties on single price contracts at 500K or thereabouts, in places like Orange, Dubbo, Bathurst etc... unfortunately you just cant get the yields required by doing these things in big cities...

as I have long maintained. Investors need to start deciding whether they believe a metro, CG focus is going to get them where they want to be, or whether some lateral, high yielding approaches such as NRAS or dual occ, need to start taking centre stage. Especially with the post APRA constraints. Especially.

 

To be truly rich I think you need to build business. Property can make you comfortable and escape the rat race no doubt.

If you want to be sailing your yacht drinking crystal then build an online platform and sell it to Facebook, Google, Microsoft.

Just remember a dumb idea in today's crazy world may actually be genius. Some bloke in the UK is making money writing on potatoes and mailing them.

 

I disagree with you on a lot of things, but on this I agree. In Australia it definitely seems like owning a business is the way to go. $100kpa income as a PAYG earner is very different to a $100kpa income business where its much easier to find ways to pay for things like cars, fuel, phones, internet, computers, travel, insurance, part of your home (home office), part of your electricity (for the home office), etc. There is also definitely a point where for most of us who aren't 1%er ex-MBB consultant "I know everyone important in this town" types where it becomes very hard to keep growing income, versus if you're in the game of running a business, you've probably got way more potential to expand or grow profitability, or even start another business off the side of your successful one.

That said I'm in the tech sector and its ridiculously crowded & full of people trying to shoot for the moon and missing by a long shot.. Personally I would much prefer to own something boring like a blue collar business that banks will happily lend to (rather than VC vultures) and is all about building cash flow rather than speculative value hoping for a product to take off. This is probably biased as most of the truly successful people I've encountered ($10-50m+ net worth) have made their money this way, by building businesses that hire 5-10 staff that after all expenses are costing them $30-50/hr per person, then consistently billing out those staff at $150+ hour. Once there are good processes in place and its mostly automated, rock up a few days a week and do a bit of managerial stuff or turn up every day & put in the hard yards to expand it from 5-10 staff to 100-150 staff if you want to.

 

Make money in business and hold it in property.