[USER]

Looking for some ideas. 24F. Dream is to have enough passive income to be a stay at home mum, work for fun and travel here and there.

Would like to be able this with or without a partner. Ideally I would like to have 60-100k passive income.

I own an investment property. Fully paid. Worth about 700k. The property brings in approx 24k per anum (after outgoings).

Growth on value is not great.

I’m wanting to sell the house to get the money and put it somewhere else to maximise the cash. Outgoings will continue to increase.

I’ve been advised to refinance for a deposit to purchase another investment around 650k + duties and renovations in an area with higher growth.

Rent would be approximately $780 per week. It will be positively geared.

If I do this option. I’ll have 500k after selling the house. Plus a mortgage of 750k around 6.5%.

A property manager has advised to use the 500k to buy more investments then refinance equity once it grows to use a deposit to purchase more properties and to rinse and repeat. However this seems like quite a lot of debt to take on.

I was thinking of puchasing shares / etf’s. I have grown my sisters portfolio approx 13% and a friends approx 20% in a year including dividends.

My other sister has grown her portfolio 40% in 4 years (without adding any funds)

I will be able to live rent free for a while until I decide I want to live on my own to start a family.

Approx 3-5 years from now.

[Russell]

A property manager, who typically makes 10% of your rental income, wants you to over leverage yourself to take on more properties…hmm…
SCHG has grown like 46% YTD. Admittedly, it’s been some good years.

I know real estate is a popular route, in particular because of the leverage you can use.

But if you sold that house and invested the $700k in SCHD or SPYD, you’d be pulling in $21k-$28k in dividends plus growth and no risk of evictions or turnover costs or unexpected maintenance.

If your happy with the house now, I’d just invest the revenue from it.

Your goal is to get to $900k or so in addition to the house to have an income of $60k from dividends plus rent.

If you can put aside $3k per month, should take you about 15 years. Less if the market stays hot, but using a long term average of 10% it would be about 15.

[Ian]

It sounds like you’ve gotten into real estate, but you don’t understand why real estate is such a powerful wealth builder.

If you are married to the Dave Ramsey school of thought you will not perform well in real estate.

You either need to allow your ideas around “debt” to evolve, or get out of real estate and focus on more simple and slower wealth growing ventures.

One of the primary reasons real estate is a power wealth growing avenue is because the federal government subsidizes your mortgage (by funneling money into fannie/Freddie to make mortgages cheap).

Beca7se you only need to put 20% down you have a built-in, subsidized 5x leverage on your investment. If you pay the property off, you are eliminating one of your biggest advantages.

Your personal residence is not an investment, and you should pay that off, but that logic doesn’t extend to rental properties.

If you really want to grow your wealth, take your 750k in equity from your rental property and do a 1031 exchange into a $3.5M multifamily property.

It “feels” big, but if you recognize it as an investment rather than a personal property it will change the scary feeling and launch you forward 10 years in your wealth growth.

[Paul]

Owning rental properties is not passive. Unless you use a good property manager, which can take a lot of your profit and be expensive.

Of course, the property manager is recommending this because he wants the business.

[Shawn]

That’s about a 3.4% return. I would sell or and 1031 exchange into something better.

You could easily buy 5 homes for that in a lot of areas.

[Sudhir]

Just look up return on S&P 500 overtime. 24k on 700k makes no sense.

[Author]

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