why not sell your IP’s in the future?

Hi,
I myself am not doing this and also I do not like the idea of living off equity.
 You borrow money to live on and it is not tax deductible as it is not an expense incurred for the purpose of producing income.
However if you had no other income but had say a 2 million dollar portfolio and borrowed say $40,000 a year to live on then this is 2% of the total value. So on average property grows by 7% p/a a year.
This is the reason banks lend for reverse mortgages.
What are the problems in future borrowings if the bank wants to know if you have a job or not to service the loans.
People with large portfolios with huge equity would get a pre approved line of credit against the equity and borrow from it to buy the next property.
I will not say low doc as the lending rules have been tightened recently.
Banks are a problem when you do not have a job and will look at rent as income but some reduce it to 70% when working out the lending. Banks will not look at borrowed money as income.
I am curious as to why people say they would never sell if they needed cash to retire on.
When you sell you incur capital gains tax, sales commission and lose a cash producing asset. You also lose any future capital growth in the asset.

Mind you this is exactly what our government does!

However I would sell an asset with a large equity if I needed a way of reducing the overall debt so that the remaining assets produce income as the debt has been reduced and also your lending power in the future increases as the remaining assets grow.

Vic,
 
For all intense and purposes Nodoc and the majority of Lodoc refinances are a thing of the past now so if you are living off equity you have a problem.

There are many ways to use equity to buy income producing products or other. You don't need to rely on the big four banks for everything.

Don't forget  you can use rental monies to pay down the debt that is created to spend on living expenses.  And then borrow deductible money to pay down the deductible interest.

   Living on equity works for as long as the capital gains exceed the money drawn down and the interest costs.

It is worth checking out just to get a good appreciation of the many tools available to an invester.

Not sure I would personally do it.

Hi, I sold and was totally debt free. Didn't work. Been kicking myself ever since.

But I bought a book by George Allen [American] and found that what I did was uncannily similar to his graph so I suspect that a number of other people might have done the same.

It appears that people on retirement cash out and then just live on whatever income is derived.

By cashing out, our borrowing capacity changes.

For instance, on a $500000 loan, I couldn't borrow very much more.

After selling those loans were zerorised and suddenly, I could borrow more than a million.

My character is such I borrow first and worry later. After I signed on the dotted line, I scurry around to make it work.

Worked like a dream.

KY