Finally, finance has been approved!

I won't bore you too much with the details, but organising the finance for this purchase has been a mini nightmare, with one stupid unnecessary delay after another. After a lot of stuffing about, finance was approved today, about a week and a half late.

I pondered on this scenario for a while and I now ask myself are banks THAT BUSY right now that it takes them over 4 weeks to approve a loan to a relatively low risk client? We have NEVER missed a payment, not even close, we have cross-collateralised way below 80% LVR, and the house we're buying a is a solid place which we will be living in. Considering the above, perhaps maybe I should apply to become a bank lender, as I can not see how ANY approval would take any more than 30 minutes. Banks, surely, SURELY, would have a lending criteria tick-and-flick, finance approved or valuations, or not. Come to think of it, a large chunk of the issue was getting to the valuer stage, which is bizarre! I'll role play a lending officer for a moment:

1. Receive loan application

2. Observe on the application that the mortgagee wants to cross collateralise with a list of properties: Order valuations.

3. Continue process of organising paperwork and making an ad-hoc decision based on paper estimates.

4. Receive valuations, approve loan.

5. Go and eat KFC.

So why does this take 4 WEEKS PEOPLE! 4 WEEKS? A load of crap...

Just a reminder...

For those of you who have not seen my website, www.ozmadeshop.com.au is "packed full of information" about property investing. In reality, it's just a crappy new site that you may find useful. Let's call it a "mini portal". The one part that I did want everyone to know about it the "properties to consider" section, where i have personally picked a few properties which I believe, yes, I, just an everyday joe, that may be suitable for investing. I personally would buy these, but my current LVR does not let me. Real estate such as the ones on this page are what people often refer to as "bread and butter", typical easy maintenance or easy reno and are sitting within the market, not outrageously cheap, not too expensive.

Have fun everyone....let's ride the waves together....

I got a little bit excited this morning...

No, it wasn't that I had a dream of eating KFC, it was a realisation upon reading this forum post. Rixter quite rightly puts forward a good argument here. After I read it, I decided to do a little tinkering and I have come up with my own strategy. I'm going to call it the "5/7 Strategy". It all makes so much sense with numbers, I got a little bit excited with the prospect that I could retire in 5 years time. Anyway, let's see it I can explain the 5/7 as clearly as possible:

In a nutshell, the 5/7 Strategy will allow you to retire in 5 years, by owning 7 investment properties.

This strategy assumes that the 7% annual growth that has historically continued, keeps going...there is little to suggest it wont.

In Year 1, you buy two houses, valued at a measly @200,000 each.

In Year 2, you buy one more.

Year 3, one more.

Year 4, one more.

Year 5, two more.

I would assume it would be vital to not cross-collateralise, as you will be drawing down on each properties' individual equity.

Year 6 - first year of semi-retirement

So by Year 5, you have accumulated 7 properties. The first property would now be worth $300,000 and you draw down the equity in this property to the maximum 80% LVR (loan to value ratio). So this gives you $40,000 for the year. You perhaps will need to continue to work part time to really sustain a higher standard of living, but you could easily live on this. This will provide you with approximately $770/week. Admittedly, this is not a huge amount, but you don't have to lift a single finger, or pay any tax on this amount. It's the equivalent of a $57,000 annual wage, before tax.

Year 7

It's now time to draw down on IP2 - Another $40,000 for the year.

Year 8-12

You continue to draw down 80% LVR on all of your acquisitions with 40K in your pocket every year.

Year 13: Jackpot!

By now, you have owned your first purchase for 12 years and, by following historical data, it will have doubled in value and it's now worth $400,000. This will mean you can now draw down the remaining $120,000 of your 80%LVR and this is the equivalent of a $171,000 pre tax wage.

That's it! It's really quite simple, well, definitely sounds very simple and it seems reasonable. Here is a little catch. If you can do this with $250,000 properties, EVERY YEAR you could draw down $96,000 and it would mean that by Year 13, you would draw down $104,000 tax free as well! Imagine that! Yes, you will have to repay the mortgages, but you have rental income coming in helping and you MAY need to work. At a minimum, imagine the extra cash coming in, tax free!

I think I may be able to do this...I'm getting a bit excited though and I'm sure there will be something that I missed and will mean this dream will crash. BUT, I'm optimistic. So here is where things get interesting (for me at least).

I have just purchased a $255,000 house, I also have another that was purchased for $390,000 and one for $151,000. I'm about to purchase another for $195,000. So I am possibly ALREADY in Year 2 of this plan. Furthermore, I have a block of land that has at least $100,000 in equity. The only issue for me, is that they are cross collateralised, but I'm sure my trusty broker and I can change that. SO, I have to acquire three more, one next year, one after that and one after that. THEN, I can possibly retire, or at least, a scenario that allows me to have some choices in my life. Like how much KFC I want to eat.