Living off your property portfolio

Anyone who invests in property will be looking to a point in the future when their investments actually pay for their lifestyles.

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Most people assume the way to earn income from your property is to eke out a few hundred dollars per week from your rental property and wait until the property itself is debt-free. Maybe you can purchase a few more over the journey and eventually, you will have some cash flow coming in.

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While cash flow is great, for me, it’s not going to be enough to get me where I want to go

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The power of property investment lies in the growth side of the equation - not the cash flow.

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I choose to purchase properties that are negatively geared. What that means is that there is always going to be a cash shortfall that I am going to be paying out of my income each week.

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Given that I am purchasing high-quality properties in blue-chip locations, I am also expecting to see above-average capital growth over a long period of time. This means that my equity is increasing at a faster rate along with the overall value of my property portfolio.

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I run my own business and have enough free cash that I can sink it into the property. So this strategy works really well for me.

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The way I am looking at generating cash flow from the portfolio comes at the end of the journey. I am planning on investing and building my portfolio for the next 20 years or more.

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Then when I feel I have built up enough equity, and have a large enough portfolio, I will have the option of selling down some properties and using that cash to pay off the debts on the other remaining properties.

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This way I will have a portfolio of properties that are mortgage-free but are also well-located and high quailty. That means its value will continue to rise and I’ll also be receiving increasing rents for the rest of my life.

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Ultimately it’s growth, not cash flow that will get you to your goals a lot faster. But the strategy is going to be different depending on your income level.

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If you earn a lower income, investing in negatively geared assets might not be the right fit for you. In property, there is no right way. You need to focus on what works for you.

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For me, I want to build the largest property portfolio I can and eventually, I will pay down the debt by selling some of the properties. That’s my exit strategy.

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That will allow me to see far more growth, and ultimately end up with high-quality assets that will build wealth for generations to come.

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Like I said, my exit strategy might be many decades away. But I have a plan in place to get me where I want to go. If you know what you want, then all you have to do is work backwards and break down the steps to get you there.