Latecia Towers has an eight-strong property portfolio, which she started to build at the age of 19. Now at 42, she is looking into passing on her assets to her daughter.
However, Latecia worries that if she continues to purchase properties – considering that her loan-to-value ratio is at 57 per cent – the assets might just be too much for her child to handle and she might be leaving too much debt to her family.
wHeregroup founder Todd Hunter joined Smart Property Investment's Phil Tarrant in to address Latecia's question "When do I stop buying?"
What are your initial thoughts on Latecia's predicament?
Todd Hunter: An LVR of 57 is very, very neat. That's nice. That's where you want to be and below ... When you get a good portfolio, you do not want to be over 60 per cent once you start to build eight or anywhere bigger than that.
If she does not buy anything else, and she's 42 and nowhere near retiring, what would happen to that LVR over the next 20 years?
Todd Hunter: It would continue to go down. But the other thing is the yield or the rents would continue to increase, and if she continued to work at paying that debt down, you would find that, maybe at that stage, there really would be no debt or very, very little debt.
I wouldn't worry about handing the burden over to the children because I think it'll be very most welcome for them to get that.
How can you pay down debt on an investment property loan?
Todd Hunter: You can either have an off-set account ... or you can just physically put the money straight onto the loan. If you work or are self-employed, any excess on the rent that comes in, you can continue to keep putting that onto the loan to reduce the balance.
So when is enough actually enough in property investment?
Todd Hunter: I think she's answered her own question for the whole reason that she's asking "When's enough, enough?" I think enough is enough now if you're questioning "Do I need to buy anymore?"
You've actually got a nice income coming in per month that you could continue that to reduce the debt. Eight properties is ample, if they're unencumbered, to retire on and the children can take over. You really don't need a portfolio any bigger than that.
If she continues to keep working for the next 20 years. I think that you'd be very close, if not have those properties paid off.
Overall, any major financial decision ultimately depends on the investor. The main factor in deciding when to stop investing is one's personal goal, according to Smart Property Investment's Phil Tarrant.
"It all comes down to what you're trying to achieve, and for a lot of people, it's about spending more time with loved ones ... If property allows you to do that, brilliant. You can pass it on, they can have a bit of luck as well," he said.
Phil concluded: "Stop if you want to stop. Keep going if you want to go. Only you can really sort that out Latecia, but speak to an accountant. If you want to do some planning around what you require for retirement, if there's a big number that you need or want to live comfortably or live the life that you want to live, [an accountant] could probably give you some guidance in how to establish what those goals are. But it pretty much comes down to you. You've got to run those numbers and work out what you want in life."
Tune in to Todd Hunter's episode of The Smart Property Investment Show to find out more tips about frequently asked questions in property investment.
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