澳洲Australia property Retire on equity, how ? | Sydney


在澳大利亚 The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m


Hello all, seek some collective wisdom here.
Age 52, $1 mil in share/super & $1m in property equity. Would like to quit the corporate jungle desk job for my sanity and health reasons. Can I afford to quit the rat race ? I don't have expensive taste, living expense $50K will do, the biggest expense is my kids high school fees around $20K for the next 2 years. Have not been able to find a genuine and competent FP (as rare as hen's teeth) at reasonable rate, most are MF salesmen who want to charge the price of a new car for the SOA, and a used car every year after to tell me how to suck egg, such as salary sacrifice into super and buy income/life insurance so they can keep the kickbacks coming.
My question is : how can one base on increasing equity ask the lender to top up the loans to live on if one is not a PAYE/in business to have a payslip (with no doc loans disappeared), and the only income is the rent. Cash bond (Steve Narva) used to be all the rage few years back but don't hear it anymore. Remember an article on Rob Williams he mentioned that he could retire now but not sure what his strategy is.
I am not ready to sit on the rocking chair & knit all day yet (I am a male, not sure what men do when they retire) , but just want to live freely, have been a battery hen/chained monkey, or as some put it gently, corporate slave, for far too long.  

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It is difficult but not impossible to get cash out of an equity drawn down in the present credit environment, granted. You could use low docs with a registered ABN. However, it will not always be like that and credit markets work in cycles too.

You would not be completely 'rent dependant'. What about the dividend income from those $1M shares?

Have you considered a relatively low risk strategy of writing covered calls against those shares? This could make you 2-3% per month and even if you were only half good at it, you'd still make $150K pa.

There are many more options for someone in your position. I'm sure you'll gets lots of opinions here.  

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I am not ready to sit on the rocking chair & knit all day yet (I am a male, not sure what men do when they retire)Click to expand...
Play golf, buy nice cars, travel, add value to your portfolio... :D

Take a look at http://www.somersoft.com/forums/showthread.php?t=25280
and perhaps http://www.somersoft.com/forums/showthread.php?t=32265

You're probably in the position to do some of the things mentioned in those threads.  

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Im far from retiring myself and have zero experience, but my first instinct is to say, cash in, whack it all into a high ineterst account and live off the interest.

As you mention, you dont have expensive taste, so this should be possible.

Or is this the old fashioned way of thinking?

Cheers

Mick  

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If you don't have anything you particularly want to do, then why retire?

You can do everything... now start eliminating things that you don't want to do, like knitting :)  

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MCS_80 said: ↑
Im far from retiring myself and have zero experience, but my first instinct is to say, cash in, whack it all into a high ineterst account and live off the interest.

As you mention, you dont have expensive taste, so this should be possible.

Or is this the old fashioned way of thinking?

Cheers

MickClick to expand...
It is a bit, but it's safe and @ 6% will provide an income of 120k pa. However inflation will eat away at your capital.  

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quitratrace said: ↑
Remember an article on Rob Williams he mentioned that he could retire now but not sure what his strategy is.Click to expand...
You're not alone there. Yes, there were big plans to exit the domain of the cubicle dwellers at the end of 2010.
The plan has changed somewhat. To be quite honest, I was quite fearful of how I would fill in my time once I escaped from my little pod. I was worried I would end up a grumpy, unshaven guy in slippers and a bath robe who had nothing to do all day but make snide comments on Somersoft.
I Looked at travel brochures, trying to find some adventures that "called" me.
Then I found some new projects that resonated with me. Big time.
Yes, I'll be escaping from the cubicle within a year (maybe 18 months) but in the meantime, I'll use the cash flow to pay the bills while I build up a new asset base that will become a business enterprise which will give me a reason to get out of bed in the morning and make my life seem more worthwhile.
If I were in your position, I'd be trying to find the path that resonated with me and head in that direction. That path will be different for each individual.
Hope you find it. You will know when you have, too.  

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MCS_80 said: ↑
Im far from retiring myself and have zero experience, but my first instinct is to say, cash in, whack it all into a high ineterst account and live off the interest.

As you mention, you dont have expensive taste, so this should be possible.

Or is this the old fashioned way of thinking?

Cheers

MickClick to expand...
I was once told a story by a friend of some people who amassed a few properties and were given advice to cash out and live the good life. I don't really remember the details/numbers, but say it was a $10mil portfolio in todays dollars - they could have done anything. They were getting $15K per year from their term deposit, quadruple the average salary in those days.... and still are to this day getting $15k. Not very exciting.

Whereas our quitratrace friend here is possibly in the position to buy 1.5mil worth of shares like KeithJ did in the thread I linked. He'd then have close to 100k income per year from the dividends. Reassess stuff in a few years and it's likely the properties would have gone up again - with which he could buy more to increase the asset base, or live on it, or repeat the process.

This isn't advice, but if ya check the link above there's quite a few options.  

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Plenty of ways you can do it.

Some ways alot better then others.

My mother/step father (47/60yrs old) live of rent from Residential investment properties and super pension payments.

If it was me i'd sell one of the IP's she made a really decent profit on and get some shares and collect div's from that. I think you need a mixed basket of stuff to be honest, the Residential property returns are very low once u factor in outgoings, but they have had consistant growth in value.

Eg. The rental return from one of her IP's is around 3.5% nett (on current value) she could get around 8-9% pretty safe from the shares stuff.

At the moment things are abit tuff and im flicking some money my mums way. Because the amount they are getting is having to look after 5 adults (only 2 earning incomes, me and sister) I pay majority of own things my sister still doesnt (only 17 yrs old)

But yeah you got around 2 mill in equity, you should be definatly able to do it, just dedicate say the next 2 months to researching the best way to do it. We have 4.5 adults being supported on roughly half that amount.


But yeah she loves not working, she has freedom and do what ever she wants when ever. The point were she left work is when my grandfather who lives with us health took a turn for the worse and i said to her "you might as well spend more time with him now, you can always go back to work later if it doesn't work".

I think its been about a yr since she left work  

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Mate....we already have one in Dazzling.....so please find something to get you up in the mornings when you retire!;)

SS can only cope with so much snide remarks......and Dazzling does that so well!:)

Rob Williams said: ↑
I was worried I would end up a grumpy, unshaven guy in slippers and a bath robe who had nothing to do all day but make snide comments on Somersoft.Click to expand...
 

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quitratrace said: ↑
Age 52, $1 mil in share/super & $1m in property equity.Click to expand...
Hmmmm not enough details.

At age 52 you cannot access super so is the $1 mil of shares in a super fund or a SMSF or a combination of shares outside super + super?

$1 mil in property equity - is this you PPOR?

Do you have any cash (sitting in an offset account etc)?  

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Propertunity said: ↑
Have you considered a relatively low risk strategy of writing covered calls against those shares? This could make you 2-3% per month and even if you were only half good at it, you'd still make $150K pa.Click to expand...
Is it really as easy as that?

I am not a dumb fellow but I do have trouble getting my head around the whole thing.

Why are we all IP believers and not just making money the easy way?  

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dtraeger2k said: ↑
Whereas our quitratrace friend here is possibly in the position to buy 1.5mil worth of shares like KeithJ did in the thread I linked. He'd then have close to 100k income per year from the dividends. Reassess stuff in a few years and it's likely the properties would have gone up again - with which he could buy more to increase the asset base, or live on it, or repeat the process.

This isn't advice, but if ya check the link above there's quite a few options.Click to expand...
If anyone wants to explore buying shares for the long term dividend stream only then I'd recommend a book:

www.motivatedmoney.com.au

Opened my eyes to a whole new way of thinking about equity investing.  

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Simon said: ↑
Is it really as easy as that?

I am not a dumb fellow but I do have trouble getting my head around the whole thing.Click to expand...
You probably answered the question.

There is work involved, and a lot of it.

Regards  

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Simon said: ↑
If anyone wants to explore buying shares for the long term dividend stream only then I'd recommend a book:

www.motivatedmoney.com.au

Opened my eyes to a whole new way of thinking about equity investing.Click to expand...
Absolutely. I read Motivated Money by Peter Thornhill about 2 weeks ago. One of my favorite reads on long term investing.

Before you know it you wont know what to do with all the dividend cheques your getting. Just look at the growth in Dividends of the past 30 years in bank stocks. :)

Great time to buy bank stocks right now as well :)  

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Simon said: ↑
Is it really as easy as that?
I am not a dumb fellow but I do have trouble getting my head around the whole thing.
Why are we all IP believers and not just making money the easy way?Click to expand...
Look I won't hijack the thread but to me covered calls is low risk. You get premium straight away from writing the call. If you get exercised and have to sell your shares, this is also at a profit. The only downside really is if the shares fall in value. HOWEVER, the OP has already accepted this risk as he already owns $1M shares.  

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Propertunity said: ↑
Look I won't hijack the thread but to me covered calls is low risk. You get premium straight away from writing the call. If you get exercised and have to sell your shares, this is also at a profit. The only downside really is if the shares fall in value. HOWEVER, the OP has already accepted this risk as he already owns $1M shares.Click to expand...
If the shares fall in value you can keep writing the calls though and collect the premuim

Just as if the value of your house may fall after a boom and you still collect the rent

Am i on the right path  

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Hi all,

If the shares fall in value you can keep writing the calls though and collect the premuimClick to expand...
The only downside really is if the shares fall in value. HOWEVER, the OP has already accepted this risk as he already owns $1M shares.Click to expand...
Covered calls always seem so easy, yet reality of the real world changes this fairly quickly. If the OP has owned the shares for a long time there are CGT implications for the stock being called away.

If you sell calls too far out of the money, there is not much premium, so no point. Even something like BHP that was trading today at around $37, has only limited premiums to sell. A $39 July call traded at $1.06 or a 2.8% premium.

Let's say for a moment that you bought BHP for $44 a couple of months ago, are you going to be happy selling them for $39, especially if the price suddenly rises through the strike price by a long way??

Free money really seems easy to those that think about it in theory.

bye  

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MCS_80 said: ↑
Im far from retiring myself and have zero experience, but my first instinct is to say, cash in, whack it all into a high ineterst account and live off the interest.

As you mention, you dont have expensive taste, so this should be possible.

Or is this the old fashioned way of thinking?Click to expand...
gooram said: ↑
It is a bit, but it's safe and @ 6% will provide an income of 120k pa. However inflation will eat away at your capital.Click to expand...
dtraeger2k said: ↑
I was once told a story by a friend of some people who amassed a few properties and were given advice to cash out and live the good life. I don't really remember the details/numbers, but say it was a $10mil portfolio in todays dollars - they could have done anything. They were getting $15K per year from their term deposit, quadruple the average salary in those days.... and still are to this day getting $15k. Not very exciting.Click to expand...
It sounds similar to story no. 88 in Jan Somers’ "Building Wealth Story by Story".

For those who aren’t familiar, it’s a great read, and available for purchase here. It contains 101 anecdotes on the good, bad and ugly of property investing (mostly it's good), collected by Jan Somers through letters from readers, people she met at seminars etc.

The story is on page 167 - “The term deposit“. It’s a sobering tale about acting on the advice of well-meaning relatives who haven’t invested and to beware inflation! The main points were:

1970: A couple aged around 40 had accumulated $300k worth of property (30 properties!). They were told by the bank, family and friends (none of whom knew as much about property) to sell up, and that they should have enough cash for the rest of their days. They acted on this advice. :eek: After buying a nice home on acreage and taking a world cruise they still had $250 000 left. Term deposit rates averaged 14% in the mid-1970s, so they earnt a huge income of $35 000 (average wages in 1975 were $8 000). :) However, high inflation followed, their capital remained the same, and the interest was being fully spent. :(

1998 (when Jan Somers wrote the book): At 68 and still in good health, in their own words, their lifestyle has “slipped to billyo”. Earning just 4% interest ($10 000) they are now eating into the capital to maintain any semblance of comfort and rely on a partial age pension. :( The properties would have been worth $4m and producing around $200 000 income. :eek:

2010: If this couple are still alive (they’d be about 80), given the property market since, the properties could be worth perhaps $10m!, and the rental income would be mouth-watering.

Relating back to the OP, the issue is that at 52, there’s a reasonable chance of living a further 30+ years (see table 7.25 here) and who knows what inflation will do during that time? Even at 70 it would be dicey e.g. What happens if you live to 100 and have a 30 year timeframe? This isn’t out of the question given medical advances.  

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Ah, knew I got it from somewhere - thanks :)  

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