Forum Replies Created
- Originally posted by aussiexj:
I am a newbie and after reading this forum topic I quickly took my post off incase it was stupid. I hope Kiyosali doesn’t join, because under the newby rules he would be there for at least 50 posts. Don’t need his input. Sometimes even the newest newbie has a new and innovative take on an old and boring view or topic.
AXJ
AXJ,
I hope that was tongue in cheek and that you didn’t really pull a post for fear of negative responses…
My suggestion around a Newbie area was to make that daunting first post “less daunting” knowing that its in an area specifically designed for you to get whatever it is off your chest. Some newbies are a bit nervous about posting in areas titled “Developing” or “Finance” or “Help Needed” or some such, but to post in “New to the forum” or “Getting Started” might be a lot less daunting.
It was just a thought, and I’d think that most members of this forum would treat newcomers nicely regardless of where their first post surfaced.
IMHO,
Michael.Magellan,
Great post and great point!
In some companies, their internet policy explicitly prohibits posting on forums or receiving internet email. Fortunately, my company does not have this strict a policy and so long as I can get my job done I’m free to frequent the forums in between tasks.
But a very good point…
Cheers,
Michael.Rob,
Not nice. [biggrin]
In my opinion the idea of a newbie area still hold merit, just conceded that other newbies might be put off by it. We’ll never know as it won’t be implemented. Just trying to get creative to keep the forum on the improve.
How’s that for a pike with a double twist? [biggrin]
Cheers,
Michael.Simon,
I didn’t know you were a moderator over here. Good form!!
Particularly liked the content of your last post this thread too. It can be very “daunting” as a newbie, and when you see venomous posts it certainly deters you from posting your thoughts IMHO.
I can see how a newbie board might come across the wrong way too in retrospect. Just stating that for me it wouldn’t have been a deterrant at all and would have actually made me more willing to post knowing I was doing so where newbies are welcomed to do so!
As always, just my 2C,
Michael.Phil,
Not a bad idea at all to split out a “Getting Started” forum board. You could even make it such that new members can only post in this sandpit board until they reach 50 posts or some such. They can still read all the other technical stuff but only post in the other boards when they’re off their L-Plates.
I’m sure the mods won’t go for this though as this forum is very unmoderated.
BTW, I would have had no issue whatsoever posting in a newbie forum until I found my feet and I’m sure this wouldn’t be a disincentive to new users.
Cheers,
Michael.Ausprop,
You need to spread your investments across multiple asset classes to mitigate the risk of any one category stalling. Even if property stalls, you can still make 5% dividend and 5% CG on shares YOY. Steve Navra’s income focussed share fund is a trading fund and makes its money on volatility not on the trend. He makes money even when the trend is backwards, and he consistently outperforms the index.
You also need to make sure you have cash in your structure too. This can take the form of your personal income, or a cash bond if you don’t have the servicability in your own right, but have a lot of spare equity. This is the point about drawing in arrears. If the whole big portfolio underperforms for the year then you don’t draw but live off your own income, if it performs then you draw in arrears to supplement your income.
At some point in time the structure is fat enough that even if you have no capital growth you can still live off your surplus cash flow components such as shares and at this point you no longer require that personal income to supplement the structure.
Cheers,
Michael.Each to their own,
I’m with Richmond completely on this one. I spend a lot more time on Somersoft now and have never had one of my posts pulled or even had any one attack any of them either. I’ve had people question my conclusions, but isn’t that what forums are supposed to engender?
I’d much rather have a well constructed meaningful dialogue with informed real estate investors than a fee for all in an unmoderated sandpit.
I guess it all comes down to your personal style and mine is much more closely aligned to the posters over on SS. There’s still good diamonds in here every now and again such as Michael Yardley’s thread (started by MiniMogul) on Developing, but for the most part its the same old “Where do I buy CF+?” and venomous attacks on financing and LOCs etc.
I’m a buy and holder using leverage for maxing my CG, so SS has more info that supports my strategy.
IMHO,
Michael.Originally posted by MichaelYardney:OK so back to living off equity….
You’can’t do this until you reach stage 2 – the capital stage of your investment career.
Imagine you have $3million dollars in properties and $2million in loans.
That leaves you with $1million in net equity.
You borrow $100,000 against this equity to live off. You allocate $7,000 of this to pay interest, leaving you $93,000 to live off. (better than paying 50% tax on earned income).
At the end of the year you have eaten up your money and have to go and borrow more.
But on average your properties have gone up $300,000 over that year (10% per annum)
Michael,
Thanks. This is exactly as I thought it would work out. Basically your capital growth exceeds your capital consumption. This being the case you’re still going forwards even though you are now living off your capital. And as you rightly point out you’re doing this in after tax dollars at a cost of only 7% interest on the drawdown.
This is exactly as Steve Navra also described his approach at his structure course yesterday for ultimately funding retirement, but you need to get there first. He also uses cashflow elements in his structure to fund the holding costs of his highly leveraged growth assets. e.g. Shares returning 5% CG and 5% dividend pa to fund borrowings on highly leveraged IPs. His particular fund has an income focus.
Its not too complex, but for a lot of people it is well beyond their current level of thinking and certainly their current comfort zone. This being a +ve CF site you’re more likely to get the view that gearing is a bad thing and leverage is risky. That’s a mindset that a lot of people are locked in to and won’t be easily swayed.
I already have over $500K in net equity and am locking this in with an LOC at present before the market slides further. I’ll then draw it down as deposits on IPs and shares, both leveraged to the max.
Thanks for the clarification.
Regards,
Michael.PS Markpatrick, Steve Navra advocates spending the equity “after” it is earnt. Basically, draw your gains a year in arrears of their earning. In this way if you have a mediocre year then you draw less, if it was a good one then there’s more to draw. Once your asset base is big enough, there’s always enough to cover living expenses its just some years are really good. [biggrin]
Ibuycashflow,
Agree with all your thoughts on the 4 P’s.
Of course, if you want just quirky in the name then good old “Whykickamoocau” and the others are always a good fall back.
Cheers,
Michael.Ajax,
That’s the first rule of marketing isn’t it: STP (Segment, Target and Position). And you position using the 4 P’s of the marketing mix, i.e. product, price, promotion and placement.
In this case the segment is obviously the backpacker set which is youth with fun on their mind. To target this group you position the product to them with the 4 P’s.
Product: Well its the backpackers, but it needs to be geared towards youth with flyers and a kitchen etc etc.
Price: Affordable for the youth.
Promotion: This is where the name is important in establishing what the brand is your trying to sell. People skimming for options might buy just based on the name alone.
Placement: Well that’s just making sure your backpackers is in an area where this sort of set would like to stay.Unfortunately, some conservative Kiwi feathers would no doubt get a little ruffled if they knew what the backpacker set was really like… [biggrin]
Cheers,
Michael.PS I’m not in Marketing, so apologise if this is a whole big pile of you-know-what.
Michael,
I subscribe to your newsletter and I think you actually have quite a lot of good information to share and do so willingly and with little vested interest. I do, however, see how some people might think that education costing $3500 for 3 days could be overpriced. And, for these people, it is! (if you know what I mean). Even for me, at the moment, it is. Not due to my mindset, just due to my current lack of financial assets and passive income. However, I hope that in years to come I will be in a position to truly benefit from the sort of information you deliver in these sessions. I would definately love to hear Dale speak as I know he’s the guru on trusts and structures. I haven’t bought his book “Trust Magic” yet but its on my must buy list. I’m off to Steve Navra’s financial structures course tomorrow and at $180ish it looks like great value.
One quick question around the draw equity to live approach that you described if I may:
If I’m drawing out my equity growth to live on, then in effect my net equity is not increasing. i.e. As my net worth increases, I draw it out and live off it. Now, if I’m neutral or slightly -ve, then I don’t have any passive income on these assets and my equity is being “consumed”.
How then do you build your net worth? IMO, its your net worth that allows you to retire from the 9-5 grind and live off the passive income. Either that or cash in the equity and buy an annuity stream or some such.
Just can’t get my head around how drawing and living off your equity growth on a neutral or negative structure gets you ahead. Unless of course you’ve got so much equity that you only draw a small portion of it and the rest still gets you ahead.
If this is the case, then the approach is really only of any use once your equity growth exceeds your cost of living by a decent degree. If it doesn’t, then there’s nothing left to re-invest for compounded growth.
Thanks,
Michael.Originally posted by Damo:I want to quit my job…help!
Damo,
What you need to do is get a blank piece of paper, write “I quit” on it and then sign and date it and hand it to your boss. That aughta do it I reckon! Gee, and all that other advice so far and noone addressed the actual question! [biggrin]
But seriously, I’m with the posters that advocated sticking with it until you already have the passive income to retire on. Look at it as a target and it will increase your drive to get there. In the meantime you need that income cashflow to help with debt servicing allowing IP leveraging.
Its a game, but there’s rules you need to play by. Map it out and then get on and do it. Your current approach uses minimal leverage IMHO. By renovating your own PPOR selling and repeating, you only ever have one asset working for you. Maybe consider leveraging all the current equity in your PPOR at 80% LVR through an LOC. Put this as 20% down on a string of IPs. If they need some cosmetic touch ups to add value then all the better.
Now you’ve got about 4 times the equity working for you! Sit back, and as Greg suggests, let capital gain do all the hard work for you. Pick your properties well, understand your servicability levels and SANF, then leverage.
If you want out of the 9-5 grind then you need to accelerate that plan a bit.
Just throwing some thoughts out there 4 ya.
Cheers,
Michael.…which is precisely why I’ve moved over to the dark side and don’t spend as much time here any more. Its not the attacks and counter attacks themselves that bother me per se, its just having to mentally filter out these posts (which can make up half of a thread) that is just too much hard work.
At least over on SS, most of the posts stay on topic and the topics are actually about REI.
Ciao,
Michael.Ajax,
I here ya!
And although I was mostly trying to be a little witty and clever, I think the concept still has actual merit!!
Backpackers are pitched at a young liberal demographic. You know, the kind of people that also go on Contiki Tours for all the “obvious” benefits of these…
So, to throw a bit of a quirky sexy conotation in to the name will probably make the place seem more edgy and less ma and pa’s lacy B&B. The kids will want something novel and fun with a big bar and lots of other young people.
I recently got back from Africa and stayed in one backpackers which actually had a spa pool in the bar itself. They had lots of nickers and bras nailed to the bar from previous lodgers, who no doubt really enjoyed their stay. [blush2]
Anyway, keep it young and fresh and pitch it at the kiddies is my tip. Rotorua backpackers would not cut it I think. But then again, as old Will himself said “What’s in a name?”
Cheers,
Michael.Cashflow,
Following on with the nervous sheep angle, how about:
Fukafurryfella backpackers. [biggrin]
Aren’t the mud baths in Rotorua called Wuckawurrawurra (and pronounced fuka-furra-furra in Maori)…
For marketing, I’m picturing a cartoon picture of a farmer in gumboots smoking a cigar leaning on the fence of a sheep pen with a lot of nervous or meek looking sheep.
Cheers,
Michael.mja,
To be honest we haven’t had it valued yet as its our PPOR. I do intend to do this soon though so I can lock in an LOC on a good valuation before prices drop too far through 06/07.
The land cost me $272K and the house was around $350K, so all up it was around $620K. I know that its currently worth around the $700K to $750K mark conservatively so we’re ahead. We could have built cheaper too and have probably over-capitalised a bit but we love those gucci additions like the $7K spa shower from Kohler and the blackbutt flooring throughout.
If I can be of any help please PM me or post again if you think others could benefit from the answers too.
Cheers,
Michael.Resi,
I still bounce back here every now and again, but have now pretty much gone over to the “dark side”, you know the site that cannot be named….
Its a lot more live and the investing strategy is more closely aligned to my own.
Maybe others also come in here via a search engine, find out about alternative forums then drift away to them?
Just a thought, and not dissing this site at all either! Its great if you’re a CF+ kinda investor.
Cheers,
Michael.mja,
Or you could do what I did and build a pole house?
My block is a 1500m2 block of subtropical rainforest with a 30 degree slope. We opted for a pole house with bearers and joists with weathertex cladding. You gotta watch the costs though as the house component ended up costing us around $350K. But we did build a gucci house with all the latest stainless steel fittings and blackbutt flooring throughout etc…
What do you expect, it was our PPOR!!Cheers,
Michael.PS. Resi, oh yeah we have water views too [biggrin]
Originally posted by resiwealth:Hi Mike and thank you,
I just got back from the whitsundays you should have come and seen what’s happening at Laguna. I am planning a hill side sub division next door will let you know later.
Regards Phil
Phil,
Look forward to it… Would have dropped in when sailing up there except had a tight schedule and another couple on board too. Had a great time though!
Cheers,
Michael.
What do you expect, it was our PPOR!!
