This is your retirement funds, the money you’re going to draw out and this is your equity increase. LVR, so we said before, this red line has always been on our FIDO, 60%, so your LVR needs to be below 60%, currently at 39. It’s a bit of a plug for Kevin’s book, in Kevin’s book there’s also a chapter 14, you can do a calculation, if you want to retire in 2026 during that 140,000. You’re expecting your properties to double in 10 years, which is a 7.2% capital growth. The factor is 13.9, so you’d need to have portfolio equity of 1.94 million equity. Currently this portfolio’s got 7.5 million and they need 1.9 so it’s starting to look good.
How do these rules that I just showed you before, the 3 rules apply to this scenario? Your equity increase, we said your initial draw down has to be 30-50% of your equity increase. This is the equity increase 622,000, 30%, 186, 50%, 311. We’re only drawing 140,000 which is 22.5%. Big tick for rule number 1 on this portfolio, it can sustain drawing 140,000 out. Number 2, your LVR levels below 60%, around 30-50 and in decline, 36, in decline, fits the 2nd rule.
Equity rate of increase is greater than the debt rate of increase. Equity rate of increase, 622, debt rate of increase, 210. Ticks that. This portfolio meets those 3 rules. Like I say, for the left brain people, you can see there, equity rate of increase is your green equity line, is greater than your debt rate of increase.
Quite simple, if you take those 3 rules away and when you go back, talk to your property mentor. This is the form that you need to fill out for your property mentor, the FIDO worksheet. Put in your details and your property mentor and your branch manager, all the details of your own home, so your purchase price, current value etc. of your property. Then your portfolio details, so all your investment properties, year of purchase, purchase price, current value, debt, your estimation of years to double.
Your property mentor can’t give advice, so you need to look at all the information and like what Troy showed before we can see what each market’s doing. You have to say what your property is doubling and what you think your cash flow might be in retirement. If you’ve got a long time, if you’re a young investor and you’ve got 20-30 years, your portfolio should be neutral or possibly cash flow positive.
Then your variables, in the example I had, it had 90,000 in 15 years time to be financially independent, inflation rate of 3%, interest rate 8.5. You can estimate those figures for your property mentor and you can also give some different variables to see how your portfolio comes out.
Short, sharp and sweet. 3 rules, if you can remember those, I did the hands up before Kevin, probably a third of the room haven’t had a FIDO done. Homework for everyone is to go home and talk to your property mentor, ask for the FIDO worksheet. You’ve taken down those 3 rules hopefully. When you get the result back from your property mentor, apply those rules to your own FIDO.
That’s Kevins world class unique program available through your property mentor free of charge. Thanks for your time and hopefully you get a little bit out that creating wealth.