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#274: Fast-Tracking Financial Independence - Navigating Debt, Portfolio Growth, Expenses and Retirement Goals
Manage episode 438921505 series 2905854
Indhold leveret af Cate Bakos, David Johnston and Mike Mortlock, Cate Bakos, David Johnston, and Mike Mortlock. Alt podcastindhold inklusive episoder, grafik og podcastbeskrivelser uploades og leveres direkte af Cate Bakos, David Johnston and Mike Mortlock, Cate Bakos, David Johnston, and Mike Mortlock eller deres podcastplatformspartner. Hvis du mener, at nogen bruger dit ophavsretligt beskyttede værk uden din tilladelse, kan du følge processen beskrevet her https://da.player.fm/legal.
Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM
This week our topic comes from a valued listener, Gaurav. Gaurav and his wife have made some impressive strides in building their property portfolio since moving to Australia in 2019 by now owning 6 properties, and they're at the stage where they are looking to achieve financial independence within the next 5 to 7 years.
"Hi Property Trio Team, I have been listening to your podcast for the last two years and have listened to every episode of the property trio previously The Property Planner, Buyer and Professor, we do miss Peter, though Mike is a great add to the team. Our goal is to be financially independent in the next 5 to 7 years. Are we on the right track, what are some of the steps we should take to get there in time."
Mike steps through the specifications of the six properties in their portfolio, all the while marvelling at their acumen and sheer drive. Their total debt sits at $3.219 million, giving them a Loan-to-Value Ratio (LVR) of about 76.6%.
This is impressive, and no mean feat!
Our couple's rental incomes may be strong, but their debt repayments are greater, leaving them with a net monthly rental loss of $3,195. But stepping through living expenses, owner-occupied mortgage obligations, negative gearing benefits and other deductions change the figures significantly.
Mike sheds more light on the associated tax benefits that Gaurav and Amit have access to. Given that their properties are negatively geared, they’re in a position to leverage some tax benefits. Their annual loss on the properties is approximately $38,340. With the properties being jointly owned, this loss would be split evenly, reducing both Amit and Gaurav's taxable incomes by $19,170 each. Given their current employment incomes, this reduction in taxable income would translate into a tax refund of about $7,092 per person. Combined, that’s a total refund of $14,184 for the year. When we break it down on a monthly basis, this refund adds an additional $1,182 to their cash flow each month. So, after factoring in this tax benefit, their after-tax surplus jumps to $6,570 per month. This is a significant boost to their financial position, helping them manage their expenses and potentially accelerate their investment goals.
Dave steps our listeners through the outlook and timing for our amazing couple to reach cashflow-positive status with their portfolio.
Cate asks the big question: Can this couple retire within seven years? At the seven-year mark, our couple's projected property portfolio is valued at just shy of six million dollars, but despite this impressive figure, they aren't in a position to retire. The Trio ponder the power of time and they mastermind some ideas for Gaurav and Amit to consider in order to optimise their retirement outcome. "To answer their original question, I think to be conservative and provide a range, I would say that they could expect to be able to live partially to entirely off their rent in 10-15 years on their current trajectory", says Dave. "A big part of this picture is to maintain good savings habits."
Dave canvases some suggestions to consider for our duo to maximise their lifestyle flexibility. Divesting doesn't always feel great for investors, but sometimes selling assets is an important part of an investor's long term plan.
.... and our gold nuggets!
Mike Mortlock's gold nugget: Dedicating time and being decisive is the key, according to Mike.
Dave Johnston's gold nugget: "Most people don't actually know their numbers when they are looking to make a purchase, let alone having a long term plan." Flying blind is so dangerous, as opposed to having a clear strategy that can aid you to make decisions that are aligned with where you want to be in the future.
Cate Bakos's gold nugget: Selling a mature property vs holding - what is the right approach? It all stems from strategy. There is no right or wrong, but investors need to be clear about their strategy before they start acquiring assets.
Show notes: https://www.propertytrio.com.au/2024/09/09/listener-question-financial-independence/
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This week our topic comes from a valued listener, Gaurav. Gaurav and his wife have made some impressive strides in building their property portfolio since moving to Australia in 2019 by now owning 6 properties, and they're at the stage where they are looking to achieve financial independence within the next 5 to 7 years.
"Hi Property Trio Team, I have been listening to your podcast for the last two years and have listened to every episode of the property trio previously The Property Planner, Buyer and Professor, we do miss Peter, though Mike is a great add to the team. Our goal is to be financially independent in the next 5 to 7 years. Are we on the right track, what are some of the steps we should take to get there in time."
Mike steps through the specifications of the six properties in their portfolio, all the while marvelling at their acumen and sheer drive. Their total debt sits at $3.219 million, giving them a Loan-to-Value Ratio (LVR) of about 76.6%.
This is impressive, and no mean feat!
Our couple's rental incomes may be strong, but their debt repayments are greater, leaving them with a net monthly rental loss of $3,195. But stepping through living expenses, owner-occupied mortgage obligations, negative gearing benefits and other deductions change the figures significantly.
Mike sheds more light on the associated tax benefits that Gaurav and Amit have access to. Given that their properties are negatively geared, they’re in a position to leverage some tax benefits. Their annual loss on the properties is approximately $38,340. With the properties being jointly owned, this loss would be split evenly, reducing both Amit and Gaurav's taxable incomes by $19,170 each. Given their current employment incomes, this reduction in taxable income would translate into a tax refund of about $7,092 per person. Combined, that’s a total refund of $14,184 for the year. When we break it down on a monthly basis, this refund adds an additional $1,182 to their cash flow each month. So, after factoring in this tax benefit, their after-tax surplus jumps to $6,570 per month. This is a significant boost to their financial position, helping them manage their expenses and potentially accelerate their investment goals.
Dave steps our listeners through the outlook and timing for our amazing couple to reach cashflow-positive status with their portfolio.
Cate asks the big question: Can this couple retire within seven years? At the seven-year mark, our couple's projected property portfolio is valued at just shy of six million dollars, but despite this impressive figure, they aren't in a position to retire. The Trio ponder the power of time and they mastermind some ideas for Gaurav and Amit to consider in order to optimise their retirement outcome. "To answer their original question, I think to be conservative and provide a range, I would say that they could expect to be able to live partially to entirely off their rent in 10-15 years on their current trajectory", says Dave. "A big part of this picture is to maintain good savings habits."
Dave canvases some suggestions to consider for our duo to maximise their lifestyle flexibility. Divesting doesn't always feel great for investors, but sometimes selling assets is an important part of an investor's long term plan.
.... and our gold nuggets!
Mike Mortlock's gold nugget: Dedicating time and being decisive is the key, according to Mike.
Dave Johnston's gold nugget: "Most people don't actually know their numbers when they are looking to make a purchase, let alone having a long term plan." Flying blind is so dangerous, as opposed to having a clear strategy that can aid you to make decisions that are aligned with where you want to be in the future.
Cate Bakos's gold nugget: Selling a mature property vs holding - what is the right approach? It all stems from strategy. There is no right or wrong, but investors need to be clear about their strategy before they start acquiring assets.
Show notes: https://www.propertytrio.com.au/2024/09/09/listener-question-financial-independence/
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