Who's Made it? - Share your Story for Inspiration!

Ive just been looking at the number of Somersoft Members -

Members: 5,206, Active Members: 868

And I was wondering out all those members just exactly how many & "Who's Made it" to financial independence with the majortiy of their passive incomes generated from property?

Please Note and beware that the questions contained in this thread may be very confronting and specific to some people. Only reply if you are prepared to share your story by answering the following specific questions......otherwise dont.

For those who "Have Made it" -

1/ How much annual net passive income was your goal when you first attained financial independence?
2/ How much net passive income do you currently generate annually?
3/ How many years did it take you to generate enough passive income to provide you financial independence?
4/ What property investment strategy/s did you utilise to attain independence and did you add any additonal strategy/s after you attain it?

For those of you who have Not made it but are planning & working towards financial independence -

1/ How much annual net passive income do you need to attain it?
2/ What date or year have you set yourself for achieving it ?
3/ How much net passive income do you currently create annually?
4/ What property investment strategy/s do you currently utilise now and are you planning on adding any new ones after you attain independence?

Me, I'm not there as yet but I'm planning on it. My goal of financial independence will be achieved when I reach $175k net per annum which is equivilent to $300k gross without having to get out of bed each morning and head off to the rat race. I plan to attain this in 2010. Currently im passively generating the equivilent of around $110k net annually.

The strategy im currently utilising is what I call "Capital Growth Averaging (CGA)" which is a specifically structured buy & hold strategy with a few twists - after 2010 Im planning to add residential developments to my current Buy & Holds.

The aim of this thread is to illustrate real life examples of aspiration to provide us all inspiration. For those of you who have shown the courage to post I'd like to Thank you in advance for sharing your story.

Note made it yet but...

Note all $ are NZ pesos !
1/ How much annual passive income do you need to attain it?
About $70,000 pre tax would be comfortable

2/ What date or year have you set yourself for achieving it ?
Aiming for 5 years time i.e. 2011

3/ How much passive income do you currently create annually?
Gross or net - gross in rents about $62k currently. The shares are in growth assets at the moment so not much income from them - no point in paying the tax man more than necessary. The interest bill pretty much equals the rents at the moment.
4/ What property investment strategy/s do you currently utilise now and are you planning on adding any new ones after you attain independence?
Buy and hold - mixture of cashflow and CG. Pay down debt from our good salaries and from downsizing our home when we retire

Haven't made it yet, so:

1/ How much annual net passive income do you need to attain it?

General plan is to own a PPOR (Sydney waterfront mansion) and $500k net in 2006 dollars.

2/ What date or year have you set yourself for achieving it ?

Mar 2017 (when I'm 40 years old). Adjusted for inflation around $1m net.

3/ How much net passive income do you currently create annually?

Currently about $5k negative. Though if I turned off all the dividend reinvestment plans I could probably eke out $5k to $10k passive cashflow. Appreciation on properties around (conservatively) $75k a year, with cashflow increasing by $3 - $5k a year (increasing dividends and rents).

4/ What property investment strategy/s do you currently utilise now and are you planning on adding any new ones after you attain independence?

Standard buy and hold for the last 6 years. Have been refinancing to get equity to buy more propery. I've been concentrating on increasing my asset base to generate CG to finance other activities. Haven't gone for cashflow properties because I believe that CG + CF = a constant. i.e. high cashflow residential has less CG than low cashflow residential (my belief, all due respect to everyone who thinks otherwise).

Currently working overseas but am planning to come back to Oz in 2 years. At that point, I'll start doing small developments, commercial, etc. To be honest haven't figured it out completely yet: plan to adapt as I learn more.

I don't think I'll ever stop investing but after I've done it for a few decades, I figure I'll just do a development project for the entertainment value.
Alex

Work in Progress

For those of you who have Not made it but are planning & working towards financial independence -

1/ How much annual net passive income do you need to attain it?
2/ What date or year have you set yourself for achieving it ?
3/ How much net passive income do you currently create annually?
4/ What property investment strategy/s do you currently utilise now and are you planning on adding any new ones after you attain independence?

Nope! Haven't reached Financial Independence yet, but working on it.

1. I want about $50,000 annual net passive income which would be a comfortable but not flash income

2. Should be OK to achieve this by about 2015

3. Don't know about the net bit, but currently gross $98,000 rent per year

4. Buy and Hold has worked well so far. Tried a bit of property development, learnt heaps, will try again soon and hope to achieve more than last time.

Otherwise, buy and hold until the time comes to start selling down to rationalise the debt on the properties being kept for the long term.

May decide to sell all of them and buy or build new closer to the time, primarily because of then heading into retirement with all new properties. In theory, this would limit the amount of R&M needed at least for the first twenty years.

If the income is strong enough - and I'm used to living on the smell of an oily rag - there is no reason why I wouldn't continue to buy property during 'retirement'.

In fact, with 'retirement' lasting so long nowadays - we can all expect about thirty years if we retire about 60 - it would be rather boring if there wasn't the occasional purchase to spice things up a bit.

Look forward to hearing other investor's points of view

Swinging Voter

Rixter said:

For those who "Have Made it" -

1/ How much annual net passive income was your goal when you first attained financial independence?
2/ How much net passive income do you currently generate annually?
3/ How many years did it take you to generate enough passive income to provide you financial independence?
4/ What property investment strategy/s did you utilise to attain independence and did you add any additonal strategy/s after you attain it?

Click to expand...

1. not part of my strategy. Although at the time I believed I needed a goal of passive income until I saw the Light.
2. the "idea" of passive income is not part of my strategy.
3. It is not passive income, but retreiveable equity and cashflow that is important to attaining financial independence.
4.Buy low, add value, rent out and hold(sell occassionally for different reasons like serviceability and refining portfolio), refinance grow more and live off some of the rental income. I did try shares for a while but did not find them as interesting as property.
Simon

simonjulie said:

3. It is not passive income, but retreiveable equity and cashflow that is important to attaining financial independence.

Click to expand...

Isn't cashflow a similar thing to 'passive income' ? How much retreiveable equity and cashflow do you need to be 'financially independant' ?

Rixter said:

For those of you who have Not made it but are planning & working towards financial independence -

1/ How much annual net passive income do you need to attain it?
2/ What date or year have you set yourself for achieving it ?
3/ How much net passive income do you currently create annually?
4/ What property investment strategy/s do you currently utilise now and are you planning on adding any new ones after you attain independence?

Click to expand...

Hi Rixter, a real confronting set of questions indeed....thanks for starting the thread ;

For us the figures look like this ;


1. I think an indexed $ 100 K p.a. should support our modest livestyle sufficiently.


2. The date has been set at April 28 2007. This will simply be when we give up paid work as an employee, but I fully expect to be busier with our properties after this date.


3. Our nett passive income is currently $ 8 K p.a., and has only just crept into positive territory after 12 years of being in the red....it's nice to finally not have to chip in and your 'assets' start looking after you, instead of the other way around. Having chased mainly "growth" type assets along the way, this 'in the red' result for so long has been delibrate, however of late we've found props that generate both growth and cashflow, which has turned our ship around nicely.

If we backed off on our LVR, our nett passive income today would be around $ 300 K p.a. We figure with the portfolio currently growing by $ 1.3 MM p.a, it makes no sense to back off just yet.


4. Everyone on the forum pretty much knows what our preferred strategy is. After April 2007, I expect we'll stick to our strategy and maybe crank it up a level or two, incorporating people or corporations into JVP's.

Have a good day everyone.

WillG said:

Isn't cashflow a similar thing to 'passive income' ? How much retreiveable equity and cashflow do you need to be 'financially independant' ?

Click to expand...

Similar but not the same. It is probably an evolved version of the same.
One would need enough cashflow to keep your portfolio and lifestyle alive and well. How much is down to the individual and their needs,wants and dreams.
Simon

Hi Folks
The strategy that I refer to above is a "working strategy"(hands on) which I believe still does fit the criteria of financial freedom.
These are my definitions of some terms that I use.
passive income= income that I no longer have to work for to receive.
Cash flow= the amount of working liquid capital available to me for whatever reason over a period in time.
retrieveable equity the amount of equity available to me to draw against to grow and maintain my investment portfolio.
LVR= loan to value ratio which is the point of balance for my investment decisions.
Example of the startegy.
IP portfolio $10ml with a lvr of 60% and historical growth of 8%pa $560Kpa rental income and loan payments $460K
This means that if the portfolio is growing equity by around $800Kpa and that holds the potential to grow further and plough back into to refine and maintain the portfolio and allows a sizeable amount of the rent to live off. The more the increase in the compounding equity the lower the LVR is driven which allows for further expansion and maintenance of the portfolio. This way the portfolio is being funded by its own growth and while the rent pays the mortgage, the rest of the income is free to use for whatever reason the investor wishes. That's the simple version.
Simon

Strategy

Hi Simon
this is slightly off topic, sorry Rixter.

I am working on similar strategy, can I ask how long you have been using this strategy? and the biggest challenge as you see it ??
You probably mentioned on forum somewhere, but can you please provide info.
Thanks


Great thread

Hi Boo
It's been evolving for some time. The biggest problem is the unknown growth factor. Because Capital growth is not rationed out in equal amounts at particular times it is always an unknown quantity. That is why adequate cashflow and reserve equity are important factors also. Finding a working comfortable LVR level is also important.
Simon

Hi Simon
Good luck and thanks

Been a long time since I've posted, but.............

1/ How much annual net passive income do you need to attain it?

About $70Kpa (no need to be greedy )

2/ What date or year have you set yourself for achieving it ?

Was July 3rd 2012 (age 45) but could be as early as July 3rd 2007 (age 40)!

3/ How much net passive income do you currently create annually?

About $20K.

4/ What property investment strategy/s do you currently utilise now and are you planning on adding any new ones after you attain independence

CF+ B&H's in high return areas. Plan to switch (partially/fully, will decide at the time) into high yield investments to take advantange franking so that returns will be essentially tax free in hand (and maybe a bit back with some income splitting with my wife, woo hoo!)

later.............

simonjulie said:

Hi Folks

IP portfolio $10ml with a lvr of 60% and historical growth of 8%pa $560Kpa rental income and loan payments $460K

Simon

Click to expand...

Hi Simon

Interesting figures.

What are the expenses that you accrue againt the IP's apart from loan payments? Don't forget to include land tax

Cheers

expenses usually add up to around 20% of the rental income as a ruff reckoner.(not including interest)
Simon.

Rixter said:

For those who "Have Made it" -

1/ How much annual net passive income was your goal when you first attained financial independence?
2/ How much net passive income do you currently generate annually?
3/ How many years did it take you to generate enough passive income to provide you financial independence?
4/ What property investment strategy/s did you utilise to attain independence and did you add any additonal strategy/s after you attain it?

Click to expand...

1/ Was busy running a business so didn't notice. The excess income was simply funnelled into paying down debt. At a guess it was most probably in about 1998 that we were generating about $100k net from investments, not only property.

2/ In excess of $1mil before tax. This does not include any equity growth, this is solely income. Most of this income is retained in our company/trust structures and be used to reduce debt(again). The dividend payments we draw will only be up to 30% tax threshold thus we will avoid paying any personal tax.

3/ 20 years

4/Initially started buying property as my personal super back in the '80's. We then used the equity to start our business in '94. As soon as business became successful started buying property again with major push when government announced GST.

Simple buy and hold or Buy/ reno and hold. Stopped buying property in 2003 and concentrated on paying down debt. We were down to <10% lvr but then started investing in share market both direct and managed funds, but mainly managed funds (share market and me don't get on ). Currently main income comes from managed funds.

This reinvestment strategy is based around raising LOC against property using some of this LOC to invest and then using margin loan up to 50%. (paying same rate for margin as LOC) This leaves me a substantial amount untouched in LOC for a just-in-case.

So to summarize my strategy it is to maintain capital which will grow in line with market. Then utilise equity from property to generate income through investing. Any excess income is used to reduce debt until another investment is found to utilise equity again.

Cheers

Handy Andy , I am so jelous, did you say 10% LVR?????

Karina

handyandy
You are my new hero
I love your posts.
What I do is as "dum as dirt" but what you do is "clever".
regards
Simon

handyandy,

Great story. It sounds like you have become a full time investor.

Thats my idea of financial independance !

Cheers

It is so inspirational to read other stories! Hope my story can help somebody too.

I am not there as yet though there is a bit of a progress…

Short History:
-Arrived in Australia in 1994 @ the age of 24 as independent migrant without knowing a single sole here;
-The only possession I had was 1 suitcase, hand luggage and about $10,000 USD;
-Started investing in residential property in 1997 and subsequently in 2000, 2001 & 2003;
-Started investing in shares in 1998/99 got seriously burnt during .com crash, learnt the lesson though;

1/ How much annual net passive income do you need to attain it?
120K net annually

2/ What date or year have you set yourself for achieving it?
2010

3/ How much net passive income do you currently create annually?
Strictly speaking it is -$40 p/w before tax. This is the conscious choice though. This allows me to keep a 2M portfolio of appreciating assets including the PPOR, shares & funds. The LVR on the whole portfolio is about 50%. The current income component of the portfolio is almost pays for the growth component. I conservatively assume 7% as growth for the whole portfolio – 2M * 7% = $140,000 p/a

4/ What property investment strategy/s do you currently utilise now and are you planning on adding any new ones after you attain independence?
Simple, “boring” buy & hold. The same applies to shares and funds where I just try to maintain the efficient portfolio with maximum returns and minimal acceptable risk.

M.