ByJohnSageMelbourne
Considerdevelopingastrongcollectionofhighdevelopmentpropertiesanddecreasingyourloan-to-valueratios(LVA).Here‘showitworks:
MichaelYardneyfrompropertyupdate.com.audescribesthatwhatmattersisthevalueofyourpossessionbase,whichmightbealittlenumberofwell-selectedresidentialorcommercialproperties.Justbecausesomebodyhasaagreatdealofresidentialorcommercialpropertiesdoesn’tindicatethatthey‘recarryingoutwellfortheinvestor!
InMichael‘sexample,theinvestorhascollected$5millionofwell-locatedresidentialorcommercialpropertiesover10or15years,plustheyowntheirownhome.Ifyouhadanormal80%Loan-to-ValueRatio,youwouldbenegativelytailored.
Ifyouhadnodebtagainstyourpropertyportfolioandhadfavorablemoneyflow,youwouldofferupthebenefitsofleverage.Ifyouhada50%LVR,yourpropertyportfoliowouldbeself-funding,andwhileyoumayacquiresomemoneycirculation,itwouldnotbeadequatetoliveon.
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Whiletheideaofa$5millionpropertyportfoliowithoutfinancialobligationsoundsgreat,it‘smuchbetterandmorerealistictobuildupa$5millionportfoliowith$2.5countlessdebt.Itwouldpermityoutogotoyourbankandsecureanextra$100,000loan,asyoumightproveyouhaveaself-fundingportfoliothatisn’treliantonyourearningsandhassomecashleftoverforserviceability.Inthismethod,you‘reslowlyincreasingyourLVR.
Afterpayinginterest,you‘releftwitharound$93,000peryeartoliveoff,andthat‘smoneyyoudonotpaytaxonasit‘snotearnings.Nowthatimageofalovelyretirementisenteringintofocus.
Conclusion
Onelastthingtosayistobepatientandwaitontherightproperty.Don’tgetrestlessandbecomeburdenedwithanunprofitableproperty!
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