Neither of the above two strategies are my preferred options however. My choice is to:
Make interest-only payments and live off the equity gains and increases in rental yield
This is relatively simple process. Once I’d achieved an increase in my portfolios value, I had my portfolio revalued. I then created a line of credit with the banks. This now allows me to use these funds to live off. This is an ideal situation, as long as your portfolio grows in value faster than your living expenses.
Most people want to know how they can eventually own their properties outright. But ask yourself this. If your portfolio is supporting your loan repayments and providing you with an adequate income, why do you need to pay them all off?
You could simply have your portfolio at a positive or neutral cash flow position and leave it to increase in value. Meanwhile you live off the equity gains. If the value of your portfolio increases on average at a faster rate than your yearly expenses, this may be a satisfactory strategy for you.
Hand it over to your kids…
If they are smart enough to handle it. You can use this strategy in conjunction with the others I’ve mentioned. Simply transfer control of a portfolio that’s held in trust by appointing a new company director. The actual asset never changes hands so no tax is incurred. You are simply signing across control of the asset’s holding entity.
As with any exit strategy, the right ownership structure is very important.
Remember, your portfolio will be equity rich and positive in cash flow by the time you make an exit. An exit strategy is all about minimising tax and maximising returns.
Tips
About the author:
Cam McLellan is a successful property investor, author, blogger and the CEO of Open Wealth Creation.
Cam and his team at Open Wealth Creation provide end to end property investment services from education and inspiration, investment property selection, finance and loan structuring, risk assessment, settlement and portfolio management.
In addition to amassing a commercial and residential property portfolio, Cameron has built a group of companies listed five times in the BRW fast growth lists.
This story originally appeared on Property Observer.
Smart Company is the leading online publication in Australia for free news, information and resources catering to Australia’s entrepreneurs, small and medium business owners and business managers.
