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Got about a year left or perhaps less to zero the primary residence bond. Reduced the monthly installments from 12k to 3k p/m over the last 3 years. Sitting on the sidelines watching the market is frustrating as hell! Cashed all previous STX investments in to move to bond and have made considerable lifestyle adjustments to throw plus minus 75-80% of nett income at it. Have no short term debt either.

Also got 2 bonded rental properties which I can start attacking a year later 1 by 1. This approach would guarantee passive income for life from the end of year 2 and 3, then start chucking all earned surpluses at STXIND,FINI,RAFI,RESI etc. to build up to my 8mil magic mark OR I'm leaning towards chucking the surplus at STXIND instead as soon as the primary residence bond is zeroed for that 8mil mark.

Keen to hear who's done this or also doing aiming for and what your experiences have been.

It's all well and good have an end goal of R 8 bar but the reality is how are you going to achieve this - what is your time horizon and once that is settled then set shorter term milestones to achieve that ultimate goal. You also need to quantify what you consider your base figure is and then align this with your ultimate goal and then determine how much you would need to invest monthly and also what can you realistically expect as an annual return on your investments. Without plotting and measuring your achievements you will more than likely not achieve your goal. There are advocates for reducing bonds as quickly as possible to reduce debt, but bonds can also be useful to invest in the markets and gain returns which could outstrip the cost of servicing your bond - so do some sums and then decide which is the most advantageous path to follow

I paid off 2 and 3/4 bonds before I started with equities. Then I realised how the tax man was going to screw me since the rental income would be taxed at 40% without any interest on the bond to deduct. After that and months of contemplation I sold the two rentals and moved everything to equities, but kept my house which had a settled bond.

You're right in saying that the rental income will be higher than the dividend yield (I assume that's what you mean when you say income) of most portfolios, but will it still be if you take tax into account? And will it still be in 6 years when the equities have grown by an average of 16.7% p/a pretty much tax free, while the property has only increased to match inflation, and all the rent has been taxed? Assuming the properties are valued at R2.5ish mil (I'm guessing to get to the R14.5k/m after rates, taxes, levy etc) they'll be worth about R3.5m in 6 years and bring in an income of R20k (which is exactly the same as R14.5k today). 

Now you said that you could invest R45p/m and that it would take you 3 years to pay off the properties, so I'll assume out of the R2.5m you owe +- R1.6m, that leaves you with R900k in opportunity cash.

Using that number, and selling to go all equity on the other hand would mean you could currently get a dividend of 3.5% (satrix divi which FYI has done 115% in the last 5 years) or R2.6k per month, but in 6 years that portfolio would be worth R8.3m (R900k at 16.7% p/a + R45kp/m) and the dividend value of R24k per month (and I know someone is going to say but what if the divi doesn't grow, but there's nothing stopping you from buying the indi for instance and switching to the divi later).

That's already above property, but also effectively tax free. On the property side you'd have to pay plenty in taxes, and let's not forget that being a landlord is a job, and there's always maintenance costs to consider too. Plus over time the equity portfolio is likely to keep stretching the gap over property if you can handle the markets ups and downs and will soon provide far more income than the rentals even excluding taxes.

I don't know your whole situation though, you may be close to retirement and might want the reliable income of a rental, and you may be paying far less tax in future if you no longer have a day job, so as always don't take any advice blindly, but get your napkin out and start doing some maths.

What I will say is that if it was me and all I was concerned about was having the biggest nest egg possible (and it was a little while ago), I'd skip the property in favour of equity. If you're attached to the rentals, keep them bonded for the tax breaks but pay off your primary residence bond so you aren't paying compound interest there anymore before climbing into shares.

I must also mention this con to selling property. It costs you a lot of money. Not just in the 5% agents fees, but also because there's considerable time between signing the offer to purchase, and transfer taking place which means your investment is effectively losing 6%p/a for the months taken to transfer.

But really well done in getting your finances into such good shape. Not many people in SA have their finances this sorted. Throwing 75% to 80% of your net into investments is amazing (it's my goal for next year too). If you read the table on http://www.investorchallenge.co.za/the-only-way-to-get-rich/ you'll see that at 80% even starting from a 0 base you're only 5.7 years away from being financially free.

Big thumbs up 

One is going to pay income tax on the sale of those equities too in order to generate income annually off of that portfolio.

Nios,

Assume

• you had held the shares you were drawing down for more than 3 years
• you are drawing down R320k pa.
• no other income

Taxable income = (320 -30) /3 =  96 k pa.

Tax payable is approx R6000 pa less deductions.

Correct me if I'm wrong, but isn't it actually better than that? Because you didn't get the shares to sell for free they obviously had a cost price. Let's say you bought them for R100k:

Yes, quite correct, I forgot to deduct the cost of the shares.  Substitute the phase "you are drawing down enough shares for R320k pa *capital gains*" and the analysis should be accurate...