{"id":6038,"date":"2015-10-11T01:00:27","date_gmt":"2015-10-10T14:00:27","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=6038"},"modified":"2015-10-11T01:00:27","modified_gmt":"2015-10-10T14:00:27","slug":"quit-your-job-work-in-property-full-time","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/quit-your-job-work-in-property-full-time\/","title":{"rendered":"Quit your job & work in property full time – Michael Yardney"},"content":{"rendered":"

 
\nEver thought of quitting your job and working on, or living off, your property full time? Is it even possible? In today’s show\u00a0Michael Yardney<\/a><\/strong>,\u00a0from Metropole Property Strategists,\u00a0gives us a reality check. He says its possible but not easy and he explains why.
\n <\/p>\n

Transcript:<\/h4>\n

Kevin:<\/b>\u00a0 I don\u2019t know about you, but I quite often hear people say that they want to quit their job and they want to go into property full time. How do you do it? Is it possible?
\nMichael Yardney, that\u2019s the question I want to ask of you. Michael, of course, is from Metropole Property Strategists. Michael, you probably hear this a lot, do you?
\nMichael:<\/b>\u00a0 Kevin, yes, I do. Look, only a couple of days ago, I heard somebody say, \u201cLook, I want to get out of the business we\u2019ve been in for 10 or 12 years now. We want to move into property full time.\u201d They say that they read about it in the magazines, they hear about it. They\u2019re wondering how they can do it. The answer is it\u2019s not easy, Kevin.
\nKevin:<\/b>\u00a0 But it is possible?
\nMichael:<\/b>\u00a0 It is possible. I think another related question, though, we probably should mention is that people say, \u201cMichael, I\u2019d like to buy an investment property, and. I want the income to pay for my kids\u2019 school fees, or maybe I want to have a little bit left over and go on holidays.\u201d
\nWhen people say, \u201cMichael, I want to get to property full time and pay my wages, I want to get into property to pay my school fees,\u201d I say to them something that disappoints them, Kevin. I say, \u201cThat\u2019s not how property works.\u201d
\nWhat I believe you have to do is rather than live off that little bit of positive cash flow that you can get out of properties if you buy cash-flow properties, is actually to build an asset base first, Kevin. To me, there are three stages of successful property investing.
\nKevin:<\/b>\u00a0 Okay. What are they, Michael?
\nMichael:<\/b>\u00a0 The first one is the asset grow stage. This usually takes 10 or 15 years or more. You need two good property cycles. My strategy is to acquire high-growth properties and let them increase in value, leverage off them, and buy them again.
\nThen you transition slowly into the cash flow stage of your investment career by lowering your loan-to-value ratios, and then, eventually, yes you can live off your properties, Kevin. But it\u2019s not something where you can buy a property today and then suddenly live off it or have it pay your school fees. It doesn\u2019t work that way. Wealthy investors that I\u2019ve dealt with have first built their assets and then transitioned to cash flow.
\nKevin:<\/b>\u00a0 You mentioned there about lowering their LVRs. How do you go about doing that?
\nMichael:<\/b>\u00a0 Kevin, there are a couple of ways. First of all, you stop or maybe you slow down buying properties so that while the value of your portfolio grows with time, your loans remain much the same. Or you can actually lower your loan-to-value ratios by increasing the value of your properties by manufacturing some capital growth through properties. Or you pay off some debt, because in the end, you get to the stage where you pay principal and interest. Or sometimes you actually have a bit of a superannuation bonus as you retire and you can use that. Sometimes, you should sell a property or two, but can I put a warning in here, please, Kevin?
\nKevin:<\/b>\u00a0 Please.
\nMichael:<\/b>\u00a0 A lot of people have heard the concept that I\u2019m going to buy ten properties and then I\u2019ll sell five at the end, and then end up with five with no debt, but that doesn\u2019t work that way. Because to buy those properties, you usually have something like an 80% loan-to-value ratio, and when you sell them, you pay some capital gains tax.
\nSelling one property doesn\u2019t give you the money to have another one debt-free, so that strategy doesn\u2019t work. But the reason you would maybe sell one or two is to lower a little bit your loan-to-value ratios.
\nKevin:<\/b>\u00a0 Given that\u2019s the case, then, is it at all possible just to live off the rent?
\nMichael:<\/b>\u00a0 People would like that concept, and let\u2019s say you want to live off $100,000 of income a year from your rents. I say to clients, \u201cHow many properties would you need?\u201d They\u2019re not really too sure about that.
\nBut if you work out that you get around 4.5% yield \u2013 and that\u2019s generous in today\u2019s economy \u2013 and if you owned $1 million worth of property with no debt, you\u2019d only have $45,000 rent, but you have to pay agents\u2019 commission and land tax, and repairs, so you\u2019d only be left with maybe $35,000.
\nIf you really want at least 100,000 to live off, Kevin, you have to have $4 million worth of real estate with no debt plus your own home, and then you\u2019d end up after tax maybe with $100,000. Kevin, most people just can\u2019t save enough or pay off that much debt to live off the rentals of their property.
\nKevin:<\/b>\u00a0 Michael, does living off equity really work?
\nMichael:<\/b>\u00a0 The concept I\u2019m talking about, you\u2019re right, is living off equity, and prior to the Global Financial Crisis, boy was it easy. You just get a low-doc loan, no-doc loan. Today, it\u2019s much harder, but despite all the APRA changes, I know a lot of our clients are doing it, I\u2019m able to do it.
\nThe concept really is you have to own the right properties, you have to have lowish loan-to-value ratios, and you have to have the right finance structures to be able to do it, but it\u2019s definitely something you should aspire to.
\nKevin:<\/b>\u00a0 Michael, any final words of warning?
\nMichael:<\/b>\u00a0 Don\u2019t believe everything you hear or you read. Very few people do property full time. It\u2019s hard to become a property developer full time, you need much deeper pockets than you think, and most people I\u2019ve seen become wealthy have got a full-time job while they build their property business on the side as a part-time job until they eventually have a big enough asset base to live off their property portfolio.
\nKevin:<\/b>\u00a0 Thank you, Michael. Michael Yardney from Metropole Property Strategists. Michael\u2019s blog, of course, is PropertyUpdate.com.au.
\nThanks, Michael.
\nMichael:<\/b>\u00a0 My pleasure, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

  Ever thought of quitting your job and working on, or living off, your property full time? Is it even possible? In today’s show\u00a0Michael Yardney,\u00a0from Metropole Property Strategists,\u00a0gives us a reality check. He says its possible but not easy and he explains why.   Transcript:…<\/p>\n","protected":false},"author":176692471,"featured_media":4677,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[10,13,25],"tags":[101],"class_list":["post-6038","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-latest-story","category-sponsored-channels","tag-podcast"],"yoast_head":"\nQuit your job & work in property full time - Michael Yardney - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/quit-your-job-work-in-property-full-time\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Quit your job & work in property full time - Michael Yardney - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  Ever thought of quitting your job and working on, or living off, your property full time? 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