An interview with Jingo
- Thread starter The Y-man
- Start date
Well leverage just magnifies the upside and the downside. Not sure it's a "revalation" that needs a myth-buster to point out.
People like Eddy Grooves used to say that too, until they went bust.
By the way, good read Jingo.
People like Eddy Grooves used to say that too, until they went bust.
By the way, good read Jingo.
Jingo,
I concur with op s. great read and thanks for sharing.
My wife are in a similar position to yourself. Been investing for a while, have a nice little portfolio built up in Melbourne, and now trying to work or the next steps.
Couple of qs if I may?
20 years off retirement age? Have you ever considered bringing this forward?
Land tax is one of my current quandries_have you considered investing inter state?
Moving portfolio into cash flow mode is also another of my current thoughts, have you considered US, living of margin loan etc? As opposed to commercial property.
Thanks again,
Matto
I concur with op s. great read and thanks for sharing.
My wife are in a similar position to yourself. Been investing for a while, have a nice little portfolio built up in Melbourne, and now trying to work or the next steps.
Couple of qs if I may?
20 years off retirement age? Have you ever considered bringing this forward?
Land tax is one of my current quandries_have you considered investing inter state?
Moving portfolio into cash flow mode is also another of my current thoughts, have you considered US, living of margin loan etc? As opposed to commercial property.
Thanks again,
Matto
Not paying off any debt. So there's an example where:
1. They pay off the home after 30 years:
Result: $3.2 million in equity
2. They pay interest only on the home and after 30 years:
Result: $2.9 million equity
Now most people would say to pay off the home but they go further because the next step is to use the amount saved on paying off the principal to help fund the shortfall on an investment property:
3. They pay interest only on home and IP and after 30 years:
Result: $6.4 million equity
The example shows that paying off your home loan can cost you millions in lost opportunity.
Their phrase is "The player focuses on increasing their asset base, not on reducing their debt".
This is just a simple long term strategy I think especially useful for our kids (people that have time to invest long term).
I don't think you understand. As you can see from their example above the point is not to pay anything off but reinvest the additional funds that would go into paying P&I into an additional asset namely IP. SO 2 assets would grow into more equity over 30 year period. That's all!
I think it's better that I stop there.
Yes, undeductible debt is after tax money and unclaimable so if your strategy is to pay off PPOR ASAP than you are right, you should pay off your home loan first.
Their approach shows to start paying interest only on PPOR and buy an IP with the savings (same additional money that would go to pay the principal part of your home loan).
Anyway it's only a strategy.
Thanks MIW, yes I completely agree with this theory during the asset building phase and have doing it myself for the last few years. (It of course relies on the banks letting you set your PPOR loan to IO and giving you a loan for another IP)
I was just curious as to whether they paid the PPOR off when nearing retirement or just used the LOE to pay the interest on the PPOR forever?
I think the assumption is you only have a certain amount of cashflow, so ifyou put it on the P&I you can't afford to buy/hold another IP, or can only afford X many. Setting the PPOR to IO frees up the cashflow for an additional IP, or 2!
Hi matto,
Thanks for the feed back. I'll have a go at answering your questions below:
Yes, same as us - it is difficult to work out what to do next. In our case we would like to gradually wind down our work over the next 10 yrs or so. Therefore taking on more -ve geared IP's isn't that appealing!
Yes - the most likely steps will be to go part time over the next 10 yrs. We would like to take some time off (long service leave etc) to travel overseas etc. Therefore, in order for us to fulfill these goals, it is crucial for us to make the correct moves investment wise.
Our land tax is sitting at about $4,500 p/a at the moment. If we decide to go ahead with a commercial property, we will put it in a trust - so we could purchase this in Vic if the right property came up without adding to our land tax bill.
If we decide to buy more resi's we will look interstate. Sydney looks appealing at the moment due to the genuine shortage of homes for tenants.
I know others have invested successfully in the US. I'm a fairly conservative person and like to see what I'm buying! (ie visit it before purchase). So I probably wouldn't go down this path.
The idea of living off a margin loan - ie investing in shares on a margin loan would also terrify me.
However a thoroughly researched venture into commercial property would appeal and increase our cashflow.
Regards Jason.
Thanks for the feed back. I'll have a go at answering your questions below:
Yes, same as us - it is difficult to work out what to do next. In our case we would like to gradually wind down our work over the next 10 yrs or so. Therefore taking on more -ve geared IP's isn't that appealing!
Yes - the most likely steps will be to go part time over the next 10 yrs. We would like to take some time off (long service leave etc) to travel overseas etc. Therefore, in order for us to fulfill these goals, it is crucial for us to make the correct moves investment wise.
Our land tax is sitting at about $4,500 p/a at the moment. If we decide to go ahead with a commercial property, we will put it in a trust - so we could purchase this in Vic if the right property came up without adding to our land tax bill.
If we decide to buy more resi's we will look interstate. Sydney looks appealing at the moment due to the genuine shortage of homes for tenants.
I know others have invested successfully in the US. I'm a fairly conservative person and like to see what I'm buying! (ie visit it before purchase). So I probably wouldn't go down this path.
The idea of living off a margin loan - ie investing in shares on a margin loan would also terrify me.
However a thoroughly researched venture into commercial property would appeal and increase our cashflow.
Regards Jason.
Hi MIW,
Thanks for your input - it is appreciated and I enjoy reading your posts as they are very well thought through with lots of experience to back them up!
Yes, I've read the book and I understand the concepts. I had a feeling that Ed Chan changed his tune a little on these concepts since the GFC? I thought he may have been a little more wary of recommending the LOE strategy since then?
Yes, with such a low LVR you could keep adding to your portfolio with very little change to your cash flow position, and this strategy would be very powerful.
I think setting the PPOR loan to interest only and investing in an IP would certainly work. It would be advisable for an investor to assess their cash flow, life goals and risk profile before going down this path.
Regards Jason.
Thank you for your response - I think I still have lots to learn...the learning will never end.
Yes, he has changed it to lower LVR exposure so it may only be advisable to go that way when you have 50% LVR or lower.
Yes I agree so that's why a generalised advice should always be assessed on individual basis and only applied if it falls within the risk/stratgey adopted.
We all take our cup of tea or coffee in a certain way (just look at the varieties). Thanks for your replies too.
I think many people changed their tune after the Global Financial Crisis hit, earlier topics of discussion included Bill Zheng close a couple of outlying branches such as Perth and his variation of the Graduated Payment Mortgage (GPM) with interest being capitalized, seemed to go the way of the dodo
The NAVRA funds still haven't recovered and capital growth within the funds would seem restrained moving forward hence some new growth orientated funds
Lending Practices have tightened and the National Consumer Credit Protection came into play
I'm sure there's many more examples from the forum
Our early inspiration came from books such as Chan, MY, etc. Many will shun their methods in times of busts and slumps. They advocate long buffers to tie you over these inevitable periods. We paid off our ppor and then borrowed against it for investment purposes (80%) with a WBC Rocket and Classic Plus offset account. Great facility. So all our debt is deductible now. Our situation is different to most here as we are developing then selling some and holding some as cashflow permits.
Thanks for sharing your story Jason. Great to hear how others have journeyed. I began with commercial back in the late 80's. Lost half my money (50k) over a few yrs of hanging on to a shop. Changed to resi and haven't looked back. May look at it in future but sticking with what I know best and enjoy at present.
All the best, RS
Thanks for sharing your story Jason. Great to hear how others have journeyed. I began with commercial back in the late 80's. Lost half my money (50k) over a few yrs of hanging on to a shop. Changed to resi and haven't looked back.
May look at it in future but sticking with what I know best and enjoy at present. All the best, RS
