How would you generate 100k in a Year?

[Julian]

Some good ideas being tossed around here. It's obviously not easy or everyone would be doing it, but is is possible as evidenced by the fact that some people are doing it.
I think some people would have an easier time of creating wealth than others due to their personalities - which would determine their personal risk profiles, their level of determination, and their willingness to make sacrifices to achieve their desired goals.
Whilst the persuit of greater wealth is important lets not forget to smell the roses along the way.
Julian

[Cliffy]

I would have done a lot more straight trading, but definitely not do ups.

I take it you wouldn't want to take title on anything except good B & H - look more at assigning and contemporaneous settlement?

[Dean@Massiveaction]

Exactly. It's one of those "hindsight being a wonderful but useless thing" things. Once you've got a few deals you realise how easy they are to find, so you learn to be more fussy

[Glenn]

Ha who needs to get another $100K a year?

I applaud all this wonderful science of planning and goal setting.
It always makes me cringe because I know I have been a bad person in regards to these issues.
Although I must admit to suggesting to the accountant (aka wife) that perhaps we should get someone to give us some business planning advice.

Anyway I am slowly developing in my mind a philosophy that matches my way of doing things. Then I will be justified in following this new wonderful way of operating a business and lifestyle that everyone raves on about. I will be able to say I was a market leader in following this new road.

Well folks this is what I have adopted as my goal since being out in the real world away from the "safe" environs of paid employment.

I do not measure my time in how many dollars I can earn.
I do not recon that my time is valuable and need to charge a certain number of $ per hour for it.
What is more important is to try and make as many investments in time as possible.
By this I mean that by helping lots of different people some rich property owners and many lowly tenants you are providing an investment in people.
By investment I mean that in time these loss making activities always seem to return to me bearing many times more gold than I could ever have earn by charging a market rate initially.

[MichaelWhyte]

Marc,

I'd try the old LOE approach. I've currently got about $750K in equity in properties including my PPOR. At present I've put only about $350K of this to work by leveraging it into the stock market for a total of $600K at play.

If I wanted $100K pa in passive income then I'd put it all to work. I'd stretch my leverage and put that $750K down and match it with $1M from LE or BT or others. Now, if I had $1.75M in the market returning 14% pa in a good blue chip fund then that's 6% clear of my LOC and leveraged equities borrowing costs. 6% of $1.75M equals $105K clear after costs.

The hard part here is finding a good fund that will return 14%, but I'm in one with a good track record at present. The other trick might be fighting the servicability argument without a salaried income and relying on the passive income from funds invested argument.

Ah well, its a raw bones bash and certainly where I'd start my thinking.

Cheers,
Michael.

BTW, that $600K at play right now just returned me $35K for the last quarter. So, even if this current performance at current invested levels were repeated for the full year I'd be at $140K passive income less costs of $40K equals $100K net, but I don't really expect the fund to return 20%+ for the full year.

[donna]

Welcome MichaelWhyte

Hi Michael,

Welcome to PropertyTalk.com. The equity you have in your property portfolio is therefore not used as security for your mortgages? I was wondering if there was a way one could use the equity to earn more $$ when it was within a property that has a 80% mortgage on it.

Also is it worth the time moving around small amounts of $$ (under $20K) into different interest earning products - basically chasing the highest interest rate paid? Or is there a min. amount of investment required to get the ROI on one's time spent sourcing the products available?

Cheers,

Donna

[cube]

Hi Michael,

Can you explain some of your acronyms for the uninitiated please.

LOE
LE
BT
Thanks

cube

[MichaelWhyte]

Hi Michael,

Can you explain some of your acronyms for the uninitiated please.

LOE
LE
BT
Thanks

cube

Cube,

No worries, and apologies...

LOE: Living off Equity. i.e. using the accumulated net worth in my assets to generate some passive income.
LE: Leveraged Equities. One of the mob in Australia that margin lend for investment in equities.
BT: Another margin lender.
Thanks: Short form for Thank You.

Donna,

I'll try and answer your question as best I can. Please pick me up if I make a mistake or answer the "wrong" question...

The equity in my properties has grown as a result of P&I payments as well as rising valuations. As such, I can tap in to this rising equity via a Line of Credit (LOC) loan. My main equity at the moment is in my Principle Place of Residence (PPOR). Its valued at $800K but I only owe $150K. So, I used an LOC to pull out about $400K recently. I used $300K of this via Leveraged Equities (LE) to margin loan $560K into a managed fund over here in Aus.

In answer to the question posed in this thread, how would I make $100K pa if need be, I would basically increase my "risk" by maxing out my "leverage" and putting it into a mix of blue chip share funds returning around the 15% pa mark. I'm a tad more conservative so am not maximising my leverage at present. I'm holding $100K of the LOC in reserve as well as not maxing my leverage on the $300K employed. I'm also holding $100K cash in a mortgage offset account in case of emergencies.

My approach has always been a strategic "big plays / small % gains" approach. I don't have too much time spare to chase the "big % / small plays". So, I look to solid investments returning a minimum of 10% and place big bets. I still love property but am waiting for the Aus property worm to turn before I pull all my equity funds out and leverage as heavily as I can back in to IPs.

Hope that helps paint the picture a bit better.

Cheers,
Michael.

[fudosan]

My approach has always been a strategic "big plays / small % gains" approach.

That's very interesting! How do you apply this technique to shares? Would you consider 15% still small % gain?

[MichaelWhyte]

That's very interesting! How do you apply this technique to shares? Would you consider 15% still small % gain?

Fudosan,

I would say "relatively" small. Tech traders would argue you can consistently return 30% pa with set and forget trading systems, but I don't do this personally as yet. 15% given the current equities market environment is very much achievable. My fund returned over 20% last year and has returned 8% for the first half of this year so will likely beat the 15% hurdle again.

However, I don't bank on 15% every year. I rely on about 10% so that I can beat my carrying costs of 7% and return a 3% minimum profit. 3% on $600K is still $18K profit, which is not bad for a bad year.

When the fund returns 20% as it did last year I make a profit of $78K which goes to further pay down my outstanding PPOR debt of only $150K today.

Mind you, this strategy is appliocable in today's market where shares are bounding ahead and property is stagnant. In two to three years time when property picks itself up off the floor and starts to show some signs of life, I'll be maximising my leverage in to that sector again. Shares and property are typically counter-cyclical so you can always make money in one of them if your willing to stay mobile.

Cheers,
Michael.

[MichaelWhyte]

When the fund returns 20% as it did last year I make a profit of $78K which goes to further pay down my outstanding PPOR debt of only $150K today.

*** edit ***

Make that an outstanding PPOR debt of only $125K today. I just checked my bank account and my distribution for this quarter was just paid into my account yesterday.

Cheers,
Michael.

[whitt]

Hi Michael,

How did you learn share trading? Was it via seminars , books or self taught.
Share trading is not as popular here in NZ as in OZ and USA.

[MichaelWhyte]

Hi Michael,

How did you learn share trading? Was it via seminars , books or self taught.
Share trading is not as popular here in NZ as in OZ and USA.

Whitt,

Didn't. Just picked a well regarded, low fee blue chip managed fund and let them do all the hard work. I'm in the process of starting to learn how to trade though as I'd like to see how I go by myself with some small seed money. I'll leave my big bucks with the big boys though...

I'm surprised to hear that the equities markets are not as important in the NZ investor psychie though. Is that consistent with other NZ forumites POV? Most financial advisors would recommend a balanced mix between property and shares. At the moment I'm out of balance by having all my investment dollars in shares and none in property. I've consciously made that call though and will rebalance when property regains momentum.

Have a great weekend,
Michael.

[McDuck]

Now minus your day job income - if you have one

why the sad face?

[Glenn]

Whitt,

Didn't. Just picked a well regarded, low fee blue chip managed fund and let them do all the hard work. I'm in the process of starting to learn how to trade though as I'd like to see how I go by myself with some small seed money. I'll leave my big bucks with the big boys though...

.

I like your thoughts Michael
I had thoughts of getting back into the sharemarket last year but concentrated instead on reducing mortages. Mortgages created by buying another property right at the beginning of the year.
I would have thought that it would have been possible to do far better than any of the managed funds without much effort. I get regular sharemarket newsletters from my share broker. I am in a small "fun" sharemarket club that did far better than your "good" investment fund. We also had a bit of fun going out to dinner several times on the proceeds.
If we had even taken the steady sure no risk path that is possible by only buying the heavy weights that the big brokers recommend then we would have done well last year. Dare I guess this year will be good also.
If our club had not bought Feltex last year we would be looking good now also after aabout 4 months in the market. But then we enjoy the fun of taking a punt.