Michael Yardney's Investment Method

Hi i'm new to this site and new to investing. I've only recently developed an interest in and started reading about investing in properties (few weeks) and i got my hands on the Michael Yardney book "how to grow a multi-million dollar property portfolio".

I understand how the whole point in building a property portfolio is to use the increasing equity to borrow against for a new property and that even though you have a large loan you also own a larger amount in assets and you use the equity to live off. But my question is when and how do you ever pay back all the money you owe the bank? He states that the point is not to own every single property you buy but then what happens when you pass away where do the loans go to? your family?

He mentions that you can reduce the debt through using your super, selling a couple properties and converting to a principle and interest loan but that wouldn't pay off everything?

Sorry for the long post i just would really appreciate people's view on this and if anyone has done this for themselves or is in the process of doing this it would be great to hear from you.

 

Debt is only good if the price of houses keeps going up.




Johny.

 

That's one school of Thought.

I'm still reading his book.

On the flip side of the coin u've got the steve mcknight/robert Kiyosaki school of thought which is that an investment has to put money in your pocket.

I think a combination of both in your portfolio is good.

 

It's the only book i've read so far and i've learnt a lot, but i've always been taught that debt is bad and you need to always pay it off.

Unlike my parents though, i've got more of an open mind than they have so that's why i was curious to learn as to what happens once you have built your property portfolio to the point where you can live off the equity, what happens with the debt when you pass away does the bank just sell everything, get their money back and keep the profits?

I will def. get my hands on books from those authors you mentioned thanks. At the moment i'm also leaning towards the idea of having a combination is probably better. Let me know what you think of Yarney's method though when you finish the book and if you still prefer to having a combination rather than just -cf properties.

 

Zorba,
MY book is a little outdated now in the sense that strategy of never selling and living off equity is most likely no longer possible with the changes brought about by the NCCP Act.
To a large sense the GFC and credit tightening, where low doc loan revaluation and refinancing strategy has all but disappeared, was the first step in ending this type of living off equity. Under the guise of responsible lending practices, it is unlikely that lenders will allow refinances for the older aged bracket of clients unless there is a definite strategy to pay off the loans within a time frame.

As changes take place, we adjust our strategies accordingly. The end goal normally needs to be expressed in terms of what residual income do I want to have on retirement (whenever that is) or by year 20xx. You then work backwards to see what level of assets and debt you need to have to achieve this. Ultimately wealth equates to assets less debts and for most people using a leverage strategy, you build the asset base early on while you have good income and use debt to finance this, then once you achieve the asset base you need, then work to reduce debt.

To more specifically answer your earlier question, on death the assets and liabilities pass to the estate of the deceased. If loans continue to be serviced, lenders tend to continue with the loan terms. In practice, how would lenders know that someone has died unless repayments stop?

Knowledge of a wide range of strategies will help you work out what suits you, reading a variety of authors, forums like this, magazines and seminars will all add to your knowledge. You will get a variety of views, some well informed, others just opinions and the skill is to explore which make sense to you.
Good luck with your investing
Greg

 

I'd recommend using the services of a Wealth Coach to set your compass straight before anyone starts their wealth creation journey... or even for people who need to be nudged back on course a little.

Tips in choosing a Wealth Coach:
- If they don't have a fully diversified approach (shares, property, etc), don't use them!
- Use one that works on a fee-for-service basis.. not commission.
- Test the waters. Ask them some probing questions about their experience and results.
- Check to ensure they don't use a cookie-cutting approach.

When it comes to property, I'm most passionate about ensuring the investor is paired with an appropriate strategy for them (as GregR points out).... almost like a dating service! The first step is education, so you're on the right track.

Some people like to be actively involved and some investors like a completely hands off approach. There are many people out there trying to convince investors that wraps, option contracts, renovations, subdivisions,... other value-add propositions are the best and only way to go, completely ignoring people's investor profile - these strategies are definitely NOT for everyone!

However, I don't offer comprehensive wealth creation advice (I only tackle property). There are people out there who handle the full gambit of investment advice and they're a great place to start. People that come to me after using these services have their goals REALLY well defined and have strong definitions to define what's going to work for them.

Wealth Coaches can be brilliant at getting you on the right path and are most valuable (I find) for the first year or so. Once your course is set, most investors are good to go it alone.

Hope that helps! : )