Why investors with large portfolios aren't as rich as you think they are

I won't read another post in this thread. J.Duke is a media accident. She struggles to work out the time on of the day.

 

She is probably a Trump fan to boot, sorry the devil made me do it

 

Mean!

I hope she writes an article about me one day...

 

Lots of newbies putting their success up...have to agree that most have very high LVRs.

In my eyes in order to considered reasonably wealthy, you need the following:

1. LVR around 45-50%
2. Asset base of $5m plus (helps with growth as it is a numbers again)
3. Diversified - no point crowing about Sydney....if all your properties are there - no growth for the next 7 year plus
4. Asset quality - preferably in the 10 largest cities in Australia
5. Good CF...CF+ is always good

 

High Net Worth Individuals (HNWI) are usually defined as having over 1m USD liquid, investable, financial assets - money you can use in a matter of few days.

Cash is king.

 

1. LVR around 45-50% - Nope 70-80%
2. Asset base of $5m plus (helps with growth as it is a numbers again) - Not even 1/2
3. Diversified - no point crowing about Sydney....if all your properties are there - no growth for the next 7 year plus - Tick none in Sydney
4. Asset quality - preferably in the 10 largest cities in Australia - Tick
5. Good CF...CF+ is always good - CF-?

Guess no article on me

 

It's interesting to observe the 'success' stories that are out there especially for those starting out in the game.

You see an abundance of "started on a low income, bought a large amount of properties in a short amount of time and now have achieved financial independence" and it gives many the hope that hey if they can do it then why can't I.

At the risk of throwing out too many cliches though it comes back to all that glitters isn't gold and people will generally only show you their highlight reel which is the multi million $ portfolio but not the behind the scenes of high debt levels where a change in interest rates or market conditions can be catastrophic to the face value of their portfolio...is that wealth by defintion?

Not saying that it is the wrong way to do it, as the leverage is one of the best wealth accumulation tools available to an investor...I suppose it comes back to an individuals definition of wealth and success but I like to think that it comes back to net worth (the accountant in me speaking).

 

And who uses this definition? Financial advisors who look at you for fees.

 

ditto net wealth is really important...and being able to keep wealth

 

Agree with most of this.

I actually satisfy some of that criteira. But at a lvr of 75% and negatice cashfloe st the moment. I am feeling far from wealthy. In fact ive gone into defensive mode

 

If you don't mind me asking, how did you end up with negative cashflow? I thought you had a large portfolio of cheaper, high yielding ips?

 

sure, ive realised that when you such a high nunber of ips, the chances of every one being occupied is very low, at any point there will be at least oneor more thats vacant, thats $200-$300 pw off,
add in
- maintenance, land tax, agency fees, increased council rates, increased water rates, tenant not paying, damage etc.

your cashflow depletes pretty quickly

its just the nature of the beast

 

I think we need to all use the same definitions
Cashflows can include principal and capital expenditure or not ...makes it hard for users of pc to figure out what cf- and cf+ is.

 

Sounds like you're having some major issues. I track my income and out goings every month and my rents are covering all property costs (mortgages, RE fees, rates, insurance) plus all my personal regular costs (food, utilities, phone, car, internet) with money left over. That's including maintenance but not major maintenance bills say over a couple of thousand. I've had minimal vacancies, if any though and lower lvr.

 

Agree with the themes here. 10 properties (that are all units in Logan) for a total asset value of $1.8m / LVR of 80% doesn't impress me. Nor does claiming you have exited the rat race because you replaced your graduate $30K income (while you live at home with mum and dad).

Don't want to sound like I'm bashing these 'young guns' that are getting out and having a crack. Good on them. I just think some are claiming victory and bathing in the glory a little too early. The race is long. Actually, rephrase that, it's not a race.

I'm far more impressed by some of the old dogs who have managed to hold through 3 cycles and generate real wealth. I'm talking legacy stuff that moves through generations. These guys and girls would have so much gold to share in terms of knowledge & learnings. Unfortunately it feels like there are far less of these people looking to share their stories.

 

Agree with what you have said...but there seems to be this focus that people can retire on their 30s-40s...let me tell you very few do it very comfortably.

The young ..a lot on here are about look at me Kim syndrome...

The ole ones..are doin their own thing...most people who have serious wealth are over 50...because it takes at least 2-3 cycles to make serious wealth.....by that I mean $10 plus portfolios with 150k plus passive incomes...lots say they make this passively...but not quite true....

 

10 units in logan at 180k is a fine portfolio.
could be diversified a lot more but its far from bad

 

5M NET either sitting in redraw/savings or ready equity is rich.

 

Not sure i really fit in to either old dog age group or young gun anymore, but to be fair to the younger crowd magazines and media want the young gun stories and hype them up. Old guy gets rich slowly working to his/her long term plan wont sell many glossies.

As a relatively new property investor and voracious reader I think the most misrepresentative statement is about financial freedom. My definition of this is enough money to stop work entirely, forever, with no drop in income. Seems some of the media define it very differently.

 

I'd take the 10 in Logan over the 10 in a small mining town like Moranbah any day of the week. Never had any issues renting to tenants in Logan and they are very very nice and good people there. People are commenting on areas they have no idea about and just read articles or hear a single story on the news. Every area has its problems even in areas like Chatswood last year when there was a murder in the restaurant - are you going to judge Chatswood by that even?

I know a tonne of Bikies (Bandidos, Rebels) that are based in North Sydney - believe me you dont want to mess with them. Still North Sydney is a beautiful place.

Like I said many times before my rentals in Northmead, Pymble and Artarmon in Sydney have more rental issues than any of my Brisbane/Logan/Ipswich and Moreton Bay investments.