Damo666… I think you have attended to many wealth creation seminars.
Damo666… you have attend to many 'wealth creation' seminars…
I am still a fan of LOE, but it is a bit harder now than it once was.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Damo666 wrote:If anyone would like to re-open this I am happy to discuss why I think once you have enough equity (at least $1m) then this can be achievable
I would like to know what % of their available equity people are comfortable in using for living expenses. e.g if you had 100k would people be happy using 10-20k, and so on as the numbers get bigger…..
If I had 1 million in available equity,and decided to access 50k or 100k per year to do whatever with,then historically I would have been fine…even if I had every thing in sydney (where the market has been a little slow for 6 years)Any new thoughts on this?
If you just pulled money out of a LOC the interest wounldn't be deductible. So after many years you would end up with a very large loan with none of the interest deductible.
I have been thinking about something slightly different.
very roughly (haven't thought this thru properly yet):
what you could do is pull out some equity and invest in shares with high yielding dividends. Maybe even margin loan with a low LVR and then capitalise the interest while living on the dividends.
eg. you have $1,000,000 in equity in the form of a LOC.
1. You take out $50,000 pa to live on. The interest on $50k would be about $3,000. So you get $47,000 to live on.or
2. you take $500,000 worth of shares. get a 30% margin loan and buy another $200,000. so total shares worth $700,000.
Interest is $30,000 on the LOC and $16,000 on the margin loan (assume 8%) = $46,000. You don't pay this interest, but let both loans capitalise.This interest should be totally deductible.Your $700,000 in shares return 7% = $49,000 (high returns because of high yielding shares with franking credits) .
But your interest is deductible so your taxable income is $3,000 and no taxpayble.Your shares grow at say 5% = $35,000 increase in year 1.
Maybe the figures could be improved by borrowing $700,000 from the LOC initially.
I am trying to get to the point where all interest is deductible and you just live on dividends or maybe even rent or a combination.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I like your train of thought. I hope the 'Henry tax review' doesn't recommend any messing around with tax deductability in regards to property or shares.
Having a large loan of non deductable debt (after years of using LOC for living expenses) is a valid concern. This means that the size of your LOC must be substantial enough to withstand this concern.
I currently rent,so all interest on properties is deductable.
I wonder how an accountant would access ypur share scenerio.Shane
It is all about the strategy,
Terryw, I like that you are thinking, but, Taking money out with the intention of margin loans has a large element of risk : Margin loan interest rate of 8%, not likely and it will only get worse with the years to come….. A drop in the stock market like the GFC – do you sell or sit and wait only to find we have entered a secular bear market like Japan for the last decade or so…… Making money is not about speculation but calculated risk with back- up plans and buffers to secure your wealth….
If you wanted to take money from your investments (equity release), think about simple measures such as release of owners equity – borrowing to pay back owners equity by forming a partnership at general law. This is tax deductible without the added expectation of relying on the stock market and unrealistic franked dividends (for the record unfranked can also be very good depending on your financial circumstances).
Your circumstances will not fit into a text book answer, there are strategies that are created for the individual all the time….. But to sum up, if you have the right tools and advice releasing equity is very possible and done by wealthy businesses, and individuals all the time. Yes it takes plannning and yes positively geared property is excellent but so to is the life when you are living on your equity…… I retired at 34
Leigh Birchnumber 8 wrote:It is all about the strategy,Terryw, I like that you are thinking, but, Taking money out with the intention of margin loans has a large element of risk : Margin loan interest rate of 8%, not likely and it will only get worse with the years to come….. A drop in the stock market like the GFC – do you sell or sit and wait only to find we have entered a secular bear market like Japan for the last decade or so…… Making money is not about speculation but calculated risk with back- up plans and buffers to secure your wealth….
If you wanted to take money from your investments (equity release), think about simple measures such as release of owners equity – borrowing to pay back owners equity by forming a partnership at general law. This is tax deductible without the added expectation of relying on the stock market and unrealistic franked dividends (for the record unfranked can also be very good depending on your financial circumstances).
Your circumstances will not fit into a text book answer, there are strategies that are created for the individual all the time….. But to sum up, if you have the right tools and advice releasing equity is very possible and done by wealthy businesses, and individuals all the time. Yes it takes plannning and yes positively geared property is excellent but so to is the life when you are living on your equity…… I retired at 34
Leigh BirchThanks for post.Do you use your equity to live off? Are you still retired and if so,how do you increase LOC's with no servicability?
(income)Am interested in your strategy.
Shanematt
Everyone will have a different story to creating wealth depending on their own personal circumstances, my story is also unique, it works and is also not for everyone i.e. what is your career / employment. How much time can you devote to work and family? I can tell you my story but you trying to replicate will not work… I was a teacher for the 12 years to create my wealth….. the questions are what are your own personal circumstances (please do not answer) and what spin can you put on these to create the best possible outcome. Do not copy that plan that is provided one individual but take on board the concepts and straegies to enable yourself….. Use this website and many other sources to equip yourself, and you will find your story will make others listen in years to come…… Keep it simple and take small steps. Serviceability – teaching as is required,
But I have organised / planned (released equity) so I will not work for a long time. http://www.birchcorp.com.auThis is a very interesting toptic.
I have been pondering this myself for a while. HOW MUCH DO I NEED TO LIVE??
From month to month, day to day?? all expenses need to be covered, like car payments, maintaining a household, having one to two children, maybe take a holiday every year etc. How much does one resonably need?? In my mind, i am thinking of a round figure of about $8000 ( im not greedy) thats for me, my wife, and any kids that come our way in the next few years ( i am 29 in July).
I have a long way to retirement, but was hoping in the next 5-7 years, if i can achieve this $8000 a month, i will be financially free.At the moment, i am using rental income to achieve this. I will strive to buy as many positive cashflow properties as i can. (I can but i havent worked out how many i need. Eg if one property cashflows $8000 per year. i will need to find 12 of them to support my ambition.)
I hope this makes sense to someone,
Qlds007 wrote:Personally i have my portfolio structured that i can live of the rents for the rest of my live and have no need to ever draw on the equity. With a LVR now at 13% over 30+ properties i expect to have the entire debt paid off in 18 months.
Congrats Richard on this remarkable achievement!!! I would love to be in this position before i hit 50y old.
how do you possibly retire at 34
no children?
no wife?
no car?
or are you living on $200 pw
cause if thats the case i could retire now
what kind of lifestyle do you live? is your wealth increasing as we speak or depleting?
shanematt, you're going to have a really tough time getting any lender to let you do this anymore. Cash Out is pretty heavily policed these days. The LOC you have in place is fine- you got that set up in the past where cash out wasnt scrutinised so closely, but when your LOC hits its limit (and it will eventually) and you go looking for more money I cant see you getting much joy unless you can show serviceability. Of course, this could change, but as it stands now- unless no docs come back to the market, or maybe, just maybe you could sneak through with a PAYG lo doc if you played it right and had a low enough LVR, I think you're going to run out of luck.
euro73 wrote:shanematt, you're going to have a really tough time getting any lender to let you do this anymore. Cash Out is pretty heavily policed these days. The LOC you have in place is fine- you got that set up in the past where cash out wasnt scrutinised so closely, but when your LOC hits its limit (and it will eventually) and you go looking for more money I cant see you getting much joy unless you can show serviceability. Of course, this could change, but as it stands now- unless no docs come back to the market, or maybe, just maybe you could sneak through with a PAYG lo doc if you played it right and had a low enough LVR, I think you're going to run out of luck.I somewhat agree with you.I am actually going for a couple of LOC's now.
Due to a lifestyle change and hence a much lower income compared to when the loans were initially taken out,I am hitting some hurdles with the refinance.I will try a few different options like paying LMI ect. Some good news is that like all things,they work in cycles,including the competition for loans.I personally believe we are at the beginning of an upswing in lender competition,with new players regularly hitting the market.They will come up with new products to beat the banks,just like Aussie and wizard did years ago.
I will keep trying until something happens.
Shane
This makes sense
TCLinvestments wrote:This is a very interesting toptic.I have been pondering this myself for a while. HOW MUCH DO I NEED TO LIVE??
From month to month, day to day?? all expenses need to be covered, like car payments, maintaining a household, having one to two children, maybe take a holiday every year etc. How much does one resonably need?? In my mind, i am thinking of a round figure of about $8000 ( im not greedy) thats for me, my wife, and any kids that come our way in the next few years ( i am 29 in July).
I have a long way to retirement, but was hoping in the next 5-7 years, if i can achieve this $8000 a month, i will be financially free.At the moment, i am using rental income to achieve this. I will strive to buy as many positive cashflow properties as i can. (I can but i havent worked out how many i need. Eg if one property cashflows $8000 per year. i will need to find 12 of them to support my ambition.)
I hope this makes sense to someone,
I think it comes down to the person, rather than the equity you have.
I know for a fact you can stop working with next to no equity I also know you can have next to no income and also live.
Like I said it comes down to the person.I've done it and I sometimes still do it I also have a mate that does the same thing
There's no point in me explaining how it can be done because 98% of you will say that can't be done, your dreaming to do that, hows that possible hahahah, you can't do that in today's market.
(but I can, I can do it in any market,) i've heard it all so now I keep it to myself and when family and friends say how did you do that, I just say the same way I told you last time, then they say your a tiny ba***** or a tin ass.
no not really just have the balls and no what I can an can't do and no how to look forward and always have backup plansSo it comes down to how far you can expand your brain and think outside the square
Once again It also comes down to the personI don't live off equity and haven't tried, but I do like the theory of it. My post above was just a quick one on one possible way to do it and I tried to improve on the concept of just taking money from a LOC. It would be so much better if the interest on the money drawn could be deductible.
One way to make the interest deducible is to borrow to pay for investment related costs, including loan interest. You can then live on the income from your investments rather than borrowed money – eg dividends or rents. Margin loans are very dangerous, but if you start off very low and keep the lvrs very low it could be safe. I am not sure how far the market dropped last time, but think it was a huge amount – does anyone remember. If you had kept your margin loans at 30% max, you may be fairly safe, but there is a risk of getting a margin call.
Getting access to your equity is a problem now because of the banks reluctance in approving LOCs when the use of the funds is not clear at the time of the applciation. They are worried people will spend their equity. A possible way around this is to prepay 1 year's interest and then live on the rents – but it won't really help in the long term. Another option may be to borrow to buy an annuity, but you will suffer some loss there. Maybe shares could be purchased with the equity, and then sold, releasing funds which are then put back into the LOC which you can then use as you please. This is probably the easiest way.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Living off the equity is the mantra of the Investors club?
Anyone can live off equity right now if they really wanted to. It's all relative to what level of lifestyle you wanted.
Move to india. They live on 500 bucks a year over there.
…I'm just sayin'.
Locs are tricky thing to get at the moment most lenders want to know exactly what the equity will be used for.
and are alot stricter then a few years ago.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
