ByJohnSageMelbourne

Thinkaboutconstructingastrongcollectionofhighdevelopmentresidentialorcommercialpropertiesandloweringyourloan-to-valueratios(LVA).Here‘showitworks:

MichaelYardneyfrompropertyupdate.com.audescribesthatwhatmattersisthevalueofyourassetbase,whichmightbealittlenumberofwell-selectedhomes.Evenifsomebodyhasaagreatdealofresidentialorcommercialpropertiesdoesnotimplythatthey‘recarryingoutwellforthefinancier!

InMichael‘sexample,theinvestorhasactuallyaccumulated$5millionofwell-locatedhomesover10or15years,plustheyowntheirownhome.Ifyouhadacommon80%Loan-to-ValueRatio,youwouldbenegativelygeared.

Ifyouhadnofinancialobligationagainstyourpropertyportfolioandhadpositivecashcirculation,youwouldprovideupthebenefitsoftakeadvantageof.Ifyouhada50%LVR,yourpropertyportfoliowouldbeself-funding,andwhileyoumaygetsomemoneycirculation,itwouldnotsufficetoliveon.

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Whiletheideaofa$5millionpropertyportfoliowithoutfinancialobligationsoundsgood,it‘sbetterandmoresensibletobuildupa$5millionportfoliowith$2.5millionofdebt.Itwouldpermityoutogotoyourbankandsecureanextra$100,000loan,asyoumightshowyouhaveaself-fundingportfoliothatisn’treliantonyourincomeandhassomecashleftoverforserviceability.Inthisway,you‘regraduallyincreasingyourLVR.

Afterpayinginterest,you‘reentrustedaround$93,000peryeartoliveoff,andthat‘smoneyyoudon’tpaytaxonasit‘snotearnings.Nowthatpictureofastunningretirementisenteringfocus.

Conclusion
Onelastthingtostateistobepatientandwaitfortherightproperty.Donotgetimpatientandendupbeingburdenedwithanunprofitableproperty!
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