Living on equity: To sell or not to sell?

Hi,
I have 5 investment properties (2 are duplex pair) plus my principle place. I own my principle place (worth 600k) and have around 400k of equity in the 5 investment properties. My issue at present is that I have recently taken a package and begun working in my "dream job", however, I earn considerably less than I used to. To cut a long story short, I have a slightly negative cashflow at present but around 130k available equity in LOC and redraw facilities...which at present cashflow rate would last 10 years. I can also easily obtain more LOC's to cover future lifestyle needs. I would like to say to my wife she can stop working and have done all the calculations on what we can "go backwards by" each year and still be comfortable but I would like to keep our cashflow as close to neutral as possible. Is it worth selling one property to achieve this (on my calculations one sale would be enough) or should we hold onto it even though it would mean increasing debt? I know which version I am most comfortable with but am interested in other educated views. Thanks.

I'd keep them.
Remember that your rents will be increasing every year
by between $2500 and $5000 and your income will also be increasing
so your situation will improve over time.
Where are the properties?
Cheers

Thanks Bill. I agree. The investment properties are all SE QLD, ie Surfers, Coomera, 2 in Bundaberg and one in Bargara. Paul.

Sounds good.
Also, interest rates IMO have peaked and they could also come down a bit next year.
Cheers

Realistically, how much cash (after cgt and other costs) is the sale of this property going to provide and will this make a significant difference to your plans?

Unless any of the property didn't meet your original fundamentals, I wouldn't sell unless you needed cash for life-saving surgery or a date with Angelina Jolie (after which, you might need medical attention anyway ).

Too expensive to replace later and as the guys mentioned there will be appreciation even if not as exciting as the biggest of the boom time. I've sold property prematurely in the past when 'uncertainty' was approaching, and am now at least a couple of $M worse off 15 years down the track The 'uncertainty' was all survivable but I panicked. Enjoy the growth

STOP, DON'T PANIC!

Panicking is a wealth destroyer! Though so many people do it...

Hi TryHard,

I had a client this morning in a super account. Her Australian share fund had dropped 8% from 31st May 07 to 31st May 08 (which wasn't too bad as the Australian market has dropped about 14% or so). We had a look at her 5 year return which was 17% pa, including these last 12 months which had sustained the loss.

She realised that the 8% drop wasn't a big deal as she still got a return of 17% pa over 5 years!

Cheers,

Dan

Along with it's cousin, BOREDOM.
After all, it's really not that exciting holding property. So many investors get itchy feet after a few years (especially if the property in question has appreciated) and look at selling to trade into something else... like shares

KITC01,
Sounds like you're moving towards 'transition'. Much is written about accumulating wealth via property, but there's not so much about how to convert it to a retirement income. It used to be easier when negatively geared property turned positive in a few years; the latest average I heard recently was 14 years to turn positive. All depends on what / where you buy.

Some say sell half the property to pay off the other half, then live off the rent, which sounds like what you are starting to look at. Others say draw down on the equity (extend the loan) because the equity value will continue to increase faster than you need it too - noting that loans for private use are not tax deductible.

I'm looking to draw down equity, invest (mainly via Navra), and then use the distributions / dividends as income (you get taxed on those anyway, and all the loan stays tax claimable). It's not a quick process though. I guess by the thread title "LOE", that's what you've been looking at.

Personnaly, I've got some time to go. But forecasts of 21% growth in SEQ & BrisVegas over the next three years will keep me holding. ... doesn't sound too BORING but I know exactly what Jacque means.

Dave

Hi KITCH01

Sounds like you have done a great job with your investing and you dont need anyone's help Well done, I wish you all the best with your Dream Job!

Cheers Banjo