Living off rent questionaire

Always a favourite topic around here. For those of you who have reached this goal would you mind sharing your story with us? Some questions:

1: How long from start to finish (in years) did it take you to achieve?

2: How many properties did it take to do it?

3: Did you grind away and pay down the whole debt or did you acquire a lot of properties and then sell some off to reach the goal?

4: Further to the above, did you start living off rent while you still had a sizable debt behind you? How did/or do you manage the risk with interest rates going up?

5: What has a passive income done for your life?

Reading answers to those questions and then somehow using that data in the hope of successfully navigating your way through the contractual / financial / taxation / banking maze to arrive in LOR land is akin to performing successful brand surgery with a blunt rusty spoon.

I consider property investing very similar to a ladder with 10 rungs on it.

At about step 8 you're living off the rents.

There is absolutely no point someone on step 8 or 9 telling people standing on the ground or just started on rungs 1 or 2 what techniques they used to jump from level 6 to 7 and then eventually to 8. The usual response is either a) 57 other questions because nothing that was revealed made any sense whatsoever, they simply don't have the tools or experience or knowledge to assimilate the information, or b) they are simply written off as being condescending if the tone or format in which the information was delivered wasn't to their rung 1 or 2 taste.

I'll give you one tip though, it's got absolutely nothing to do with accumulating a huge gaggle of properties that a typical rung 1 or rung 2 investor would buy. This hollow "I've got X properties" is in most cases totally meaningless when it comes to freeing you from the shackles of working for a wage, especially when the cashflows from them are nothing short of pathetic.

When someone on step 1 or 2 accuses someone on level 9 of being condescending because they simply don't get it and / or want to be treated equally when they are clearly not w.r.t. the subject at hand being discussed, it becomes somewhat difficult.

I get what you are saying Dazz but I don't consider myself on step 1 or 2. It is something I am thinking of doing in the next 5-10 years based on where my portfolio is at and wanted to hear other peoples stories.

Now answer the questions you cranky rung 8 *******.

What ladder?...there's a ladder??

BayView said:

What ladder?...there's a ladder??

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Only big timers know about the ladder.

Dazz said:

There is absolutely no point someone on step 8 or 9 telling people standing on the ground or just started on rungs 1 or 2 what techniques they used to jump from level 6 to 7 and then eventually to 8. The usual response is either a) 57 other questions because nothing that was revealed made any sense whatsoever, they simply don't have the tools or experience or knowledge to assimilate the information, or b) they are simply written off as being condescending if the tone or format in which the information was delivered wasn't to their rung 1 or 2 taste.

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Fair comment but that wasn't my reading of the question (probably because I'm a lowly 3 or 4 ). It looks more like a question of method as in: buy/double and sell half or buy a number and pay them off.

I have seen people here say "just buy twice as many as you want, wait for them to double in price and then sell half". Of course it is not that simple because of captial gains tax etc.

The other school of thought revolves around getting one of the properties into positive territory and paying down the loan then use the rent from that and another one to pay down the next one etc until all are paid off.

I guess the OP is asking for people who have actually done this what method they used... rather than rung 2's fantasising about how they will get from rung 2 to rung 8.

I would be interested to know the method people used too. Not because I want to duplicate it but because it might prompt me to think about my investment strategy.

ok180 said:

Only big timers know about the ladder.

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what about the snakes?

Ed Barton said:

what about the snakes?

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Dodgy REAs? They stop you trying to climb the ladder

perthguy said:

Dodgy REAs? They stop you trying to climb the ladder

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and some wannabe politicians.

ok180 said:

1: How long from start to finish (in years) did it take you to achieve?

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13

ok180 said:

2: How many properties did it take to do it?

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8~9 mostly small 1BR or 2BR inner city apartments that people said to avoid.

ok180 said:

3: Did you grind away and pay down the whole debt or did you acquire a lot of properties and then sell some off to reach the goal?

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Both, as well as other investment (or occasionally divestment) activities.

ok180 said:

4: Further to the above, did you start living off rent while you still had a sizable debt behind you? How did/or do you manage the risk with interest rates going up?

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Yes.
Kept working to lower debt.
Lowered spending to bare minimum.

ok180 said:

5: What has a passive income done for your life?

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Able to invest 100% of our worked income or spend it all on luxuries.
Not really worried about job loss.



The Y-man

Living off rent

For those of you who have reached this goal would you mind sharing your story with us? Some questions:

1: How long from start to finish (in years) did it take you to achieve?
8 years
2: How many properties did it take to do it?
7 properties, mix of townhouses and apartments. This was starting with bare land or building behind old houses.

3: Did you grind away and pay down the whole debt or did you acquire a lot of properties and then sell some off to reach the goal?

Paid down most of the debt with rents and salary contributions

4: Further to the above, did you start living off rent while you still had a sizable debt behind you?

No prefer to use wages for living ($40,000pa) Not living off rent until the end of 2014

How did/or do you manage the risk with interest rates going up?
Made sure that I had tenants even if it meant dropping the rent. Future rates rises will not have much of an impact on my current situation.

5: What has a passive income done for your life?[/QUOTE]
Financial freedom ie Work as an option. Opened my eyes to larger projects.[/COLOR][/B]

The first few years were tough financially. Rent increases and low interest rates have made a big dent on the debt.


Cheers
Charlotte30

ok180 said:

Always a favourite topic around here. For those of you who have reached this goal would you mind sharing your story with us? Some questions:

1: How long from start to finish (in years) did it take you to achieve?
13 years from first PPOR, or 5 years from first IP.
Simply followed the Rich Dad Poor Dad plan and progressed through all quadrants, still need to work on the 4th quadrant.

2: How many properties did it take to do it?
13 at the moment, all self developed town houses.

3: Did you grind away and pay down the whole debt or did you acquire a lot of properties and then sell some off to reach the goal?
Never sold an IP, just offsetting debt via business income.

4: Further to the above, did you start living off rent while you still had a sizable debt behind you? How did/or do you manage the risk with interest rates going up?
We are not currently living off rent yet, but plan to next year at around the 1/4 mil mark.
We still have sizeable debt, but it's all relative to cashflow and equity position.
A combination of low LVR's and high equity will eliminate risk. Our PPOR which is not income producing is a decent chunk of our portfolio.

5: What has a passive income done for your life?
The plans are to travel, spend time with my young daughter, participate more in sporting activities, get out and look for business and investing opportunities.
Basically, give me free time to do all the things I want to do, when I want to do them.

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In red above.

My Father lives off rent. I'll tell you more about it

He divorced and gave away everything he owned to my Mother so us kidd had some comfort. Moved away. Worked hard. Started his own business. Worked very hard 7 days a week for 20 years while paying off the house, living frugally and buying and paying off a few IP's not as many as you might think in fact. He now lives on a dream 50 acres, small mortgage and receives income from the IP's. He seems to have more than enough money and is very happy and comfortable

I would consider myself on rung 0, and not the right person to speak of such things. That said, from observation:

1. usually not that many properties;
2. great cashflow or capital growth on said few properties;

(they don't concern themselves with the number as opposed to, how will this next purchase fit in with the big picture) - this is where most people seem to go wrong

3. the big secret.

(in most cases there has been a huge income, windfall or business they never spoke of that facilitated the process)

While I do work, my annual expenses are well covered by my net rent so can probably attempt to answer this.

1: How long from start to finish (in years) did it take you to achieve?

Around 3 years from investing in my first property.

But I had a first bucket of gold from working through university and investing in shares in 2005-2007 and selling out in January 2008 including selling stocks like Rio Tinto at 150s, Macquarie at $80, Babcock and Brown at $20+ etc 6 months ahead of GFC. So if you included the share investing time, maybe 6 years.

2: How many properties did it take to do it?

Achieved it by around 4 properties.

Dazz also correct about number of properties meaning nothing. Eg I could convert some of my properties to 1-2 very high quality commercial/industrial properties and get the same if not more net rent.

3: Did you grind away and pay down the whole debt or did you acquire a lot of properties and then sell some off to reach the goal?

Probably more the former. Since my net rent well covered my cost of living, my salary and any other profits from investing was 100% saved. And in fact most of my rent is also saved. The compounding effect of paying down debt/having opportunities to seek higher return on equity is very important.

4: Further to the above, did you start living off rent while you still had a sizable debt behind you? How did/or do you manage the risk with interest rates going up?

Yes, had debt behind me. But I worked out I'd still be positive at 8-10% interest rates, which naysayers love to scare you with on this forum.

And after a bit of time, the accumulation of equity, salary, leftover rent provides a buffer.

Perhaps more importantly, all this income is off the base of my original deposits. In other words, I could liquidate my assets now, realise the capital growth/increased equity and probably double my passive income by reinvesting. Some would therefore say I have a lazy balance sheet but I think you'd find that with a lot of investors also.

5: What has a passive income done for your life?

People say money doesn't buy you happiness. But it brings confidence, certainty, stability, knowing you can sleep at home tomorrow if your work annoys you sufficiently. For me, these things go towards making me feel at ease and happy.

It obviously adds to the material side of things too. And allows you to think bigger things, pursue bigger investments etc if you don't want to retire yet.

Thanks for contributing guys. The most interesting thing to come of this i think is the answer to question 3. I have always tried to pay down the IP debts at various times to build buffers. A lot of the gurus out there advocate not to do this and instead just keep buying because property always goes up.

I say once you get to a place you are happy at you should try and smash down the debt as much as possible to buy some of your life back and hedge against interest rate rises.

I have found this very interesting too, thanks for sharing guys.
The GFC really stuffed us up and now we need to rethink our strategy. This is helpful to see what others have done. I think the more info you can have to make decisions, the better.

Deltaberry said:

People say money doesn't buy you happiness. But it brings confidence, certainty, stability, knowing you can sleep at home tomorrow if your work annoys you sufficiently. For me, these things go towards making me feel at ease and happy.

It obviously adds to the material side of things too. And allows you to think bigger things, pursue bigger investments etc if you don't want to retire yet.[/COLOR]

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well said DB. and happiness doesn't buy you money.

Thanks for sharing. Very inspiring.

I've found this thread valuable as well.

Interesting that a lot of people have paid down the debt from work and wages rather than selling assets.

I've started to think along these lines recently. Rather than leveraging myself to the hilt, I can maintain my current portfolio, pay down debt, and retire on about $80k in 13 years.