Property Market Is HOT

Property market in Sydney is crazy and burning hot right now. I wrote about some friends speculating about the property market back in December 2011 and that they were going to hold off on buying. Other friends have been steadily building their property portfolio.

Anyone with the doomsday 'property market will crash' mentality has lost out big time. Since December 2011 when I wrote about property speculation, the market has grown so strongly by $100k to $200k plus per property (this is the ball park figure for houses and semi detached etc, not apartments). Either way, property of all type and in all locations have appreciated in value.

The more property you own, the more your net wealth has increased. Simple as that. Time to get revaluations on all our properties and refinance to buy more for more rental income.

The house that we bought in April 2013 earlier this year has already appreciated in value by $100k. Recent local sales for similar sized house and land have been really strong. The real estate agent told us, "Lucky you bought a few months ago because if you had waited to buy now, you'd be paying $100k extra for the house that you bought."

Is it luck? Or is it just consistent planning and effort? 

Paying Endless Insurance Bills

Lately it feels like all I've been doing is paying insurance bills one after the other to protect against an unknown future and unforeseen events that may be detrimental to my hip pocket.

In the past few weeks, there have been a multitude of bills and statements regarding death insurance, disability insurance, car insurance, home and contents insurance, health insurance and the list is endless.

Since I haven't claimed against my insurance providers for years and years, I feel like I'm paying premiums into a black hole. Although being young means we are the ones paying for the older folks who are claiming insurance, it still doesn't alleviate the feeling that paying for insurance is such a (necessary) waste.

I'd rather pay my premiums and not claim, than have to claim of course. To claim insurance would mean whatever detrimental event that I've insured against has actually happened and I'd rather not have those events happen!

Does anyone else find insurance bills tiresome?

To Fix The Mortgage Or Not Fix?

Now that we are thoroughly settled into the house and getting used to the new local amenities, travelling arrangements and so forth, it's time to review our finances again.

With a few mortgage payments already made, there's a little bit of routine happening now. Bills are coming fast and furiously with the multiple investments assets but that's fine because the bad stuff(bills and expenses) is exceeded by the greater positive stuff(investment income).

Currently, mortgage interest rates are at historic lows and looks to be staying that way indefinitely until our economy improves. Particularly the mining industry which is in the doldrums and majorly affecting government tax revenue, thus curtailing the government's spending in relation to social welfare and spending on infrastructure.

To Fix Or Not Fix The Mortgage Rates?

Hamlet(or rather Shakespeare) posed the question, "to be or not to be?" ... although he faced an existential crisis, our crisis is not as dramatic but rather a financial issue.

While interest rates are at record lows, they can be lowered even further. However on the other hand, if the economy improved then the rates would head upwards again to curtail inflation. 50/50 really.

The house mortgage is currently a 100% variable mortgage loan attached with features such as unlimited repayments, ability to redraw, 100% offset facility and the interest is at 5.25%. 

If we were to fix, the interest rate would be 4.99% with the option to fix for two or three years. By fixing a portion of the mortgage, that fixed portion would then be stymied by the ability to only make a maximum of $10k in extra repayments per annum and there's probably a limit applicable for redraws(will have to check the terms and conditions), penalties and limits to loan portability, penalties on breaking fixed loans and the offset account will no longer be 100% offset against the fixed loan component.

I've been contemplating on fixing 50% of the loan because I prefer certainty to uncertainty and if interest rates were to drop further, that's okay. BUT if interest rates were to rise then that could possibly hamper our lifestyle somewhat and pose new financial challenges. 

Property Planning Australia wrote a short little article which illustrates reasons that are to be considered prior to fixing which I thought was rather useful and may be of help to you if you're facing a similar scenario:

"• Would you like more certainty in knowing what your loan repayments will be?• Do you feel like you are stretched with your cash flow?• Do you have little equity or cash buffer to draw upon if things got tougher?• Are you risk averse?• If rates kept going lower after you fix, would you be comfortable knowing that you cannot access the lower variable rate without a hefty penalty that would almost certainly make it non-beneficial to get out of your higher fixed rate?• Are you confident that you will not sell your house or want to refinance during the fixed rate period?• Do you have non-deductible and deductible debt, and would you feel more comfortable knowing that you had a set repayment for part or all of one or the other?
If you answer yes to many of these questions, then you are starting to build a case for fixing your debt."

Did You Know That You Can Fix Your Mortgage Loan In Multiple Structures?

I was thinking about fixing and how it would throw a spanner in the works against making unlimited extra repayments due to the $10k limit on extra repayments...then the question arose, what if we could have multiple fixed portions? That would mean the extra repayments would only be capped by the structure that we've set up. Thought that was too good to be true, however a trip to the bank confirmed that YES it was possible to have several concurrent fixed loan components and each fixed loan component has the facility to accept $10k in extra repayments per annum!

That means that instead of the original structure that I was considering, I could have a better structure that was more flexible. We could even have 5 fixed loan components which would allow $50k in extra repayments per annum in addition to the unlimited extra repayment on the variable portion if we were really that flush with spare funds.

Structure 1: 

50% variable at 5.25%, 50% fixed at 4.99% for two years

Thus extra repayments on fixed portion capped at $10k per annum while extra repayments on variable portion is unlimited

Structure 2: 

50% variable at 5.25%, 25% fixed at 4.99% for two years and 25% fixed at 4.99% for three years

Thus extra repayments on fixed portions capped at total of $20k per annum while extra repayments on variable portion is unlimited

When I queried the branch manager on why people didn't structure their loan with the greatest flexibility, she replied that not many people knew about structuring and even if you tried explaining or suggesting the structure to them they would get confused, so her work was to help people arrange what they wanted.

As mentioned before in previous posts, I haven't got a crystal ball for the future, however with our current loan, I would like some certainty regarding mortgage repayments. On the other hand, I don't want to limit our ability to make extra repayments so the best option for our scenario is to go ahead with Structure 2 and restructure the mortgage into three parts. 

Buy Next Investment Property Along North West Rail Link?

Although the reality of buying another investment property(IP) isn't anywhere on the immediate horizon, these sort of plans need a long time to think about before implementation. Especially since property prices in Sydney are so crazy.

There are so many promising areas to buy properties for rental income. I've written about passive income from my investment property previously and most recently about the most recent house acquisition to live in.

Having visited Castle Hill Towers recently, I saw the construction of the North West Rail Link being built. This new train line will connect Nor West Business Park with the city and connect the Hills district suburbs that are densely populated(they currently only have bus services available) to finally acquire public rail services.

Suburbs that are likely to rise in prices due to the North West Rail Link stations being built: Cudgegong Road, Rouse Hill, Kellyville, Bella Vista, Norwest, Showground, Castle Hill and Cherrybrook. The new train line will hook up via Epping to go to Macquarie University, Macquarie Park, North Ryde and Chatswood, possibly terminating at the city.

When the Epping to Chatswood rail link was being built, I KNEW that property prices would boom DURING the construction and AFTER the rail line was finally completed. Never in my wildest imagination could I have known how quickly property prices APPRECIATED when the rail line was finally complete. Pretty much almost all the apartments within 10-15 minutes walking distance went up in value by approximately $100k to $150k within the year.

You could work and save year after year by scrimping and eating peanut butter sandwiches, not going on holidays and living miserly OR you could make wise investment moves and simply capture investment gains by investing wisely.

Other friends of ours are looking at buying IPs and there are so many potential suburbs. Any property within 15km proximity to the city will go up in value as our population grows and any suburbs that has large scale, public/social infrastructures being built will go up in value.

I'm still tossing over the idea about whether it would be a better move to buy close to the new railway stations being built on the new rail line or whether to stick to the tried and tested blue chip suburbs that are within 5km of Sydney CBD and are close to either water, cafes, schools or transport etc.

Historically, either choices would be wise but which would be the wisest move? Wouldn't we all like to see the future?

Big Houses And Hours Of Cleaning

Since I've moved to a house, there's been endless cleaning and work. If you've been wondering why SMG has been offline and haven't posted for a while, that's the reason.

When I wrote about the endless search in the quest to buy a house, I mentioned that I liked houses with wooden floorboards, high ceilings, minimum of two bathrooms, built ins and so forth. Now that I've moved into the actual house, reality hits.

Houses with large rooms take longer to heat up, houses with high ceilings take even longer to heat up, and generally houses with the combination of large rooms, high ceilings and wooden floorboards are destined to be cold in winter and takes forever to heat up. 

Dust likes to pile up along the edge of the rooms and along the hallways. Dust will pile up regardless of how often you vacuum! Where on earth does all the dust come from when the windows are almost always shut?!

I've rattled on about loving gardening and plants and my addiction to plants. Now that there's a garden attached to the house, there's hours of gardening work involved which is more maintenance than pleasure. House dwellers never seem to mention these things. Previously when I've lived on the farm, everything was allowed to grow wild and it looked great.

Living in a house however, there's endless lawn to mow, weeds to pull out from the garden, the footpath, the paving and from the lawn itself. Dead flower heads to cut off, plants to trim and hedges to maintain. 

We are still unpacking despite having moved for several weeks now. Bigger houses need more furniture and the house is semi furnished with furniture from the apartment. There are vacant rooms with nothing in them and although that doesn't bother me, it does bother Mr SMG who is a perfectionist, loves brand new and doesn't like hand-me-downs. I can be a perfectionist as well, but fortunately not when it relates to furnishing the house and housing decor or else I'd have gone mad looking at the empty rooms and endless space.

So more shopping to do and on top of that, the mortgage payments have commenced and the monthly interest is painful. I had forgotten how much mortgage interest charges suck. 

The goal would be to knuckle down and work on tackling the mortgage to make huge ass lump sum repayments. However, that goal has been derailed somewhat by the endless quest to furnish the house, repair the house (leaking taps, broken/damaged washers), installing security doors and dead bolts, installing down lights so the house isn't so fashionably dim and buying rugs so that we can heat up the house.

Oh, and you know what happens when you buy houses that have beautifully high ceilings? You need to buy a HUGE, TALL ladder so that you can reach the lights, the top of the built ins and be able to repair and clean the higher sections of the house ;p So think twice before your dreams become reality and the reality doesn't measure up with expectations... larger houses aren't always the solution and the reality of maintaining a larger house means dedicating hours to housework that wasn't previously required.

What Advice Would You Give Yourself 10 Years Ago?

"The time for extracting a lesson from history is ever at
hand for those who are wise." Demosthenes 

Ten years is long enough for any of us to see how an important decision we chose to take at the cross road has led to the point in the road that we are facing now. What significant decisions have you made ten years ago?

Was it the choice of which college or university to attend? Which degree to study? Which employer to work for? Which business to start for yourself? How much you decided to save up in those years? What and how many properties or shares you have bought and invested in? How many holidays you have had? The significant others that you have dated, married, had a child with or separated from?

Do you regret some of the choices that you made ten years ago? Or are you happy with the choices you made all those years ago?

After reading the Somersoft Property forum about what the forum posters wished to tell their younger selves, I thought it would be interesting to post up some of their advices that they wish they could have advised their younger selves. We only get older right? So if what we learn today can mean that we gain knowledge to implement and action for the rest of our lives to make our life easier, wouldn't you want to know?

Here are some of the advice that the forum posters wished they could have given their younger self ten years ago after knowing what they know now, happy reading =). Oh and read with an open mind because the quotes below are from a PROPERTY forum and as such, they are pro-property investors with less inclination towards investing in the stock market compared to members of stock forums:

*  "buy something, for goodness sake. Get into real estate. Be careful- but not so careful as not to buy...If someone was going to buy another property, I would be suggesting, as Rolf de Roos does, to at least aim to look at 100 properties.I'm not sure about his other figures- but, at least, if you look aim at looking at 100 properties, you'll start to get at some ideas of good vs bad value"

*  "Get a real education, a financial education. Read as many books on financial topics as you can...Your borrowing capacity is not a problem (if you know the rights things and speak to the right people)"

* "Educate myself on all things financial, Property, Tax, shares etc...Invest as early as possible as time is the essence of good investing...Do not be suckered into public or media hype or fear...Device a plan and stick to it...Keep all things in perspective...By(sic: buy) all the property you can! "now"!!!!!!!!"

* "If I was to give myself advice for 10 years ago it would probably be to put into practice the principles from the book The Richest Man in Babylon."

* "FINANCIALLY – Educate yourself. Don’t follow the crowd. Take a chance now and then. MORALLY – Stubbornly believe in your abilities and be good to those less fortunate.For one thing I would have hugged and kissed my mum a lot more often and not taken her for granted."

* "1. First, last, foremost: Educate yourself financially, friend. Read some good books, it's not really difficult, get to know the basics and understand how this money stuff works!! Learn, learn, learn so you can work smarter, not harder. 2. Spend less. Those doodads add up. Did you know you can afford a property on what you spend on lunches/coffees/etc? 3. Use 1 and 2 to buy effective investments. Buy property now. Don't wait to 'save up the deposit', don't wait 'to pay off your mortgage'. Use the house equity & buy now. Balance negative geared with positive cashflow."

* " I would have got into property and not share traded or bought into managed funds like I did then!! That is for sure!" [Must have been burnt by the stock market]

* "What I would do differently if I could go back would be to purchase a property as close to the beach or city as possible, take interest only loans for 90% of purchase price (and pay the LMI), wait 6 - 12 months to see the effect on my cashflow and use surplus savings from my income to fund the next purchase....quite a conservative strategy but one that would have me sitting on at least 5 properties that as a group would be putting cash in my pocket and worth substantially more than my purchase costs. I would have my current accountant preparing my tax returns and give me advice on how to structure investments."


* "I wish I had read the book E-Myth by Michael Gerber back then. The best book for business owners I have read... I invest in what I know, which is real estate and I always have a plan "B", my what if it doesn't work plan. I have written goals, a business plan and I let those around me know what they are and try to keep them focused on them also. Being part of a great network is a very big help, I now know the advantage of franchises although I had never before been an advocate."

* "*make sure you are armed with information
     *develop your strategy and then make a move
     *don't blindly follow the advise of someone else
     *don't be complacent, know what's going on at all times
     *use the rental income to your advantage
     *do everything possible to avoid selling."

* " 1. Invest whilst you are living at home with your parents. It would seem to be the easiest way to gain a good foothold for achieving financial independence.
2. Buy property that you can rent out, not land. I bought land at the age of 21, with the intent of building my future home on it in X years time. Would have been much smarter to buy a rental property, especially one I could live in later, perhaps.
3. Obtain financial education - not from your parents because more likely than not their "advice" will be ultra-conservative and keep you in the rat race (but you still gotta love your parents).
4. Get into the habit of saving a'la Richest Man in Babylon. Material possessions are not everything.
5. Balance your life and your work, and value your health."


* "Don't waste your time on jealousy. Sometimes you're ahead, sometimes you're behind. The race is long and, in the end, it's only with yourself...Get to know your parents. You never know when they'll be gone for good. Be nice to your siblings. They're your best link to your past and the people most likely to stick with you in the future. Understand that friends come and go, but with a precious few you should hold on. Work hard to bridge the gaps in geography and lifestyle, because the older you get, the more you need the people who knew you when you were young."

* "Keep going with your plan. It works out. Don't get scared as the numbers get bigger."

Living Large When You're Less Than Flushed

Andre Rison in the promotion of the documentary 'Broke.' Credit: Broke

I thought I’d approach lifestyle from a different angle and perspective. Instead of the slow and steady ways of saving up to buy, there are other reasons as to why and when using credit can be an attractive option. Did I just say using credit can be an attractive option? YEP!!

The financial responsibilities that new homeowners face can feel overwhelming. Due to the higher cost of living, many people simply cannot afford all aspects of the "good life." Particularly when it concerns furnishing their house.

An effective way to create a luxurious life for yourself without having to spend a great deal of money upfront is through furniture rental.

If you have plenty of expenses such as school fees, children, living, social, clothes or starting a new business, you can create leverage for yourself through the judicious use of rental credit options. Credit options allow immediate gratification until you are able to save up the money to make cash purchases.

When Renting Furniture Makes Sense

If you have attended open houses before, you may notice that some houses are lavishly and stylishly decorated. The owners don’t necessarily have exquisite taste nor style, they simply rent their furniture to decorate their houses so that it looks beautiful to prospective home buyers.

If you’re starting up a business or decorating a home office, you may not wish to spend lump sums of cash on furniture and equipment upfront and may wish to rent furniture and equipment so that it helps with your cash flow.

If you’re keen on changing the style of your home frequently, then renting furniture can be a good option because you can indulge in the latest seasonal trend. You may not know how you wish to style your house permanently so renting furniture can be an option until you decide on which pieces of furniture you wish to acquire for the long run.

Renting furniture oddly enough, makes a lot more sense than renting luxury cars and luxury handbags because you get to use it daily. Used as part of a strategy to sell your home, you can attract more buyers to bid for the property you are trying to sell. Used as a strategy to look stylish and professional to clients when you're operating a home office or starting up a business, it can look a lot more professional and help with your monthly cash flow.

Used as a strategy to counter your fickle styling taste and desire to be on trend with home decor, you don't get stuck with permanent pieces of furniture that you'll have to dump afterwards or try to desperately sell so that you can upgrade to the latest fashion.

Are 'Working Age People' Saving Enough?

Whilst reading the Sydney Morning Herald, there was an article saying that, "One of the nation's biggest superannuation funds has urged the government to encourage people to make more voluntary super contributions, saying most working-age people will have inadequate savings to fund a comfortable retirement."

The problem with those type of statements and claims is that the Australian super funds aka retirement funds, have no idea how much assets and investments that the 'working-age people' hold outside of super. So their comments aren't exactly applicable for certain subsets of the population.

Why would 'working-age people' voluntarily contribute more into their super funds when there are inherent risks in contributing more?

Risks such as legislative risk with successive governments constantly fidgeting with the tax rates and tax structures within the super fund environment. Increasing the access age also is a deterrent. Instead of being able to access at 55 years old, later generations are able to access at 68 years old. Lastly, the super fund's performances has been erratic at best. They charge fees to maintain and 'invest' our super money but I've yet to see my own fund outperform the index and justify the 'management' and 'investment' fees that they charge.

Not everyone is driven by the tax incentives and think that contributing the maximum into super is a great strategy simply because the tax on super is 15% on contribution and 15% on earnings. Even marginal tax rates of up to 45% outside of super isn't going to encourage people to maximise their voluntary super contributions.

So on the surface, if the super funds were to look at my balance or my friends' balances for example, then they're likely to see minimal voluntary contributions and think, "this generation has inadequate savings!". But they lack the ability to see that many friends and relatives prefer to invest directly into property and the stock market. It's not all about the tax savings! It's also about accessibility and flexibility to our savings, the ability to use our money however we desire and whenever we desire.

Once any money is voluntarily contributed into super funds, access is restricted. Early access is pretty much nil unless you are under extreme financial hardship and are about to be homeless, then you may be 'lucky' to be able to access $10,000 of your own money that's been locked up in super. The only other way you can have early access is if you've got a terminal illness. Those aren't attractive incentives to encourage my generation to contribute more into super.

Limited access and flexibility is a huge disincentive for the 'working-age people'. If those 'working-age people' are anything like my friends and I, then they'd prefer their funds outside of super so that it can be used to buy a house to live in, fund any family plans such as having children, pay for weddings, travelling and all the other financial demands of living life.

It's feasible for folks over 50 years old to contribute more to super but for Generation X, Y and Generation iGadgets, the restrictions are a HUGE disincentive.

So will my generation have a comfortable retirement just because we don't contribute large amounts voluntarily to our super funds?

Just by looking at my peers and friends' peers, I can resoundingly say yes. The majority that I know of, have invested outside of their super fund. They're saving and they're investing, but they're simply doing it outside of the super fund environment because the freedom and flexibility of using their funds however they wish outweigh the allure of the super funds' 15% tax environment that comes with plenty of strings attached.

Moving From One PPOR To A New PPOR

Sorry to any international readers but this post is particularly for the local readers in Australia.

What is a PPOR? A PPOR is the acronym for Principal Place of Residence. The Australian Tax Office (ATO) has various capital gains tax free arrangements for PPORs depending on when you moved in, when you moved out, when it was sold or how long it has been rented out for.

A friend of mine recently bought a new PPOR home. His previous house is going to be rented out when he moves into the new one. These actions have several tax implications.

If you find yourself in a situation where you've outgrown your current house, need to buy a new one and move into it but still wish to retain and rent out your old home, then there are a few crucial steps to take.

These steps help to ensure that you can minimise the potential income tax payable while the old property is rented and the capital gains tax payable later down the track should the ex-PPOR be sold.

The Three Scenarios

1) PPOR are capital gains tax free if you buy, move in and then sell and move out. Any price appreciation on the PPOR is tax free.

 2) However, if you buy, move in, move out and then rent the property without nominating a new abode as your PPOR(so you are renting your new residency), then the property can be rented out for 6 years before capital gains tax is payable on a pro rata basis.

3) If you buy a new PPOR house, move out of the ex-PPOR house and turn that ex-PPOR into a rental property, then capital gains tax is payable on the price appreciation on the ex-PPOR the moment it is a rental property and there is no 6 years of rental grace with regards to capital gains. Income tax is payable on all rental income, expenses for running and maintaining the property becomes deductible and various items and expenses becomes depreciable.

When You Turn The Old PPOR Into A Rental Property

This is a crucial moment for a few important steps to be taken if you wish to save yourself a lot of taxation headaches.

1) The moment that you move out, engage a professional property valuer to value your old PPOR before it is rented out so that any property price appreciation that the property has experienced thus far is capital gains tax free and you will only be taxed capital gains on any price appreciation once the property is available for rent.

2) Engage a Quantity Surveyor to provide you with a property depreciation schedule which consists of two parts:
       A) Capital Works Allowances which is depreciation on the construction cost of the building(items such built ins, kitchen cupboards, floor tiles, clothes hoist, toilet bowls and tubs) if the residential building was built after 18 July 1985. For applicable residential properties, refurbishments and renovation works are also deductible. Capital Works Allowances also applies to any structural improvements such as fencing, paving, pergolas, garden sheds etc that have been constructed after February 2002. 
       B) Plant And Equipment Depreciation covers items such as carpets, curtains, washing machines, stoves and hot water tanks for example.

Both Capital Works Allowances and Plant And Equipment Depreciation will be applied to reduce your rental income and thus, your income tax.

These are a few important steps that can save you thousands of dollars of income tax annually and should you sell the old-ex-PPOR in the future, potentially save you thousands in capital gains tax as well. And just when you thought relocating all the furniture was the hardest part...

Bought A House And My Portfolio Is Up 20%

Finally, Mr SMG and I have bought a house. If you've been visiting my progress bars on my homepage then you will have noticed that last year in June, I reached my goal for a house deposit and have since then, been house hunting madly. It's either dump the funds into another asset or leave it earning a pitiful amount of bank interest that becomes bugger all after tax.

After checking out almost seventy open house inspections, making a few multiple re-visits, reading property contracts after contracts, I can definitely say that I'm much more of a walking encyclopaedia when it relates to property structures, easements, covenants, location, aspects and layouts.

It's significantly tougher looking for a house to live in than buying an investment property(IP).

With IPs, you can literally overlook annoying little things like the ceiling being an average standard height or the bedrooms are smaller than usual. But oh my...when looking for a house to actually live in, the hunt is tougher because of minor things like some rooms not receiving sufficient sunlight(installing skylights being impractical or impossible due to the house being double storey), the kitchen pantry is too small, the ceilings aren't high enough, there is scruffy or dingy carpet that has to be pulled off and wooden floorboards installed, the master bedroom is too small, no built ins, the stove isn't gas but electric, the house isn't double brick, three bedrooms and one bathroom aren't big enough, it's strata or community titled and not free standing...so on and so forth.

I have absolutely no qualms about renovating but at this stage of my life, I don't have time to sniff paint, rip carpets off, drill and rebuild. Theoretically, ripping up the carpets, installing polished wooden floorboards, adding skylights, building outdoor alfresco dining areas, fresh paint, building built ins, renovating kitchens and bathrooms all add value to property than buying one that already has all those features in place(thus building equity to enable refinancing for further acquisitions) . However, like mentioned, I simply haven't got the time to do those things in the near future...perhaps with the next property in the coming years.

All these fussy complaints would have been overlooked if we were just buying another IP. If it was just another investment property, I'd have no issues with buying a single brick, fibro, cladding or whatever type of property as long as it met the simple requisites of location, transport, shops and possibly schools (it depends on which type of tenants you wish to target).

With our latest acquisition, my finances have become merged somewhat with Mr SMG's finances so it is getting rather difficult to break down the performance of my investment portfolio. The only thing that hasn't been merged or intermingled is my stock portfolio, which I'm happy to say actually grew by 20% over the past year. If you have read previous posts of mine, then you'll know which stocks I hold across the various sectors (mining, agricultural, retail and financial).

The power of compounding is nothing to be sneezed at. Every single dollar has been working hard over these years and it's amazing how much capital growth and passive income there have been from investing and reinvesting the income from those investments back into obtaining additional assets.

So far, so good.