ByJohnSageMelbourne
Thinkaboutbuildingastrongcollectionofhighdevelopmentresidentialorcommercialpropertiesandloweringyourloan-to-valueratios(LVA).Here‘showitworks:
MichaelYardneyfrompropertyupdate.com.audiscussesthatwhatmattersistheworthofyourpropertybase,whichcouldbealittlenumberofwell-selectedhomes.Evenifsomeonehasaagreatdealofresidentialorcommercialpropertiesdoesn’tindicatethatthey‘reperformingwellforthefinancier!
InMichael‘sexample,thefinancierhascollected$5countlesswell-locatedpropertiesover10or15years,plustheyowntheirownhouse.Ifyouhadatypical80%Loan-to-ValueRatio,youwouldbeadverselytailored.
Ifyouhadnodebtversusyourpropertyportfolioandhadfavorablecashcirculation,youwouldgiveupthebenefitsofleverage.Ifyouhada50%LVR,yourpropertyportfoliowouldbeself-funding,andwhileyoumightacquiresomemoneycirculation,itwouldnotbeadequatetosurviveon.
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Whiletheconceptofa$5millionpropertyportfoliowithoutfinancialobligationsoundsgood,it‘sbetterandmoresensibletoaccumulatea$5millionportfoliowith$2.5countlessdebt.Itwouldpermityoutogotoyourbankandprotectanextra$100,000loan,asyoumightproveyouhaveaself-fundingportfoliothatisn’treliantonyourearningsandhassomecashleftoverforserviceability.Inthismethod,you‘reslowlyincreasingyourLVR.
Afterpayinginterest,you‘reentrustedtoaround$93,000eachyeartoliveoff,andthat‘smoneyyoudonotpaytaxonasit‘snotearnings.Nowthatimageofalovelyretirementisenteringintofocus.
Conclusion
Onelastthingtostateistobepatientandawaitthebestproperty.Don’tgetimpatientandendupbeingburdenedwithanunprofitableproperty!
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