澳洲Australia property How many Ip's needed to retire?


在澳大利亚 I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo


Hi All,

I was doing some calculations over the weekend, see I have two IP's and am looking to buy my 3rd, and just as a test I wanted to see how many IP's I should have which will permit me to retire.

Here is the things...I calculated the income for the two properties for a period of 1 year...that is I removed the mortgage repayments as my scenario was that I had paid off the two houses.

Here is what I found out...when I subtracted water rates, council rates, Property management fees, insurance and repairs...my costs for the year was a whopping 36% of my income...and that was with the mortgage repayments not being counted (I would hate to think what the % would come to if I had to pay land tax as well!)

All in all, my NET income for the year was as low as $375 a week...for the two properties combined.

I am needing approx. $1000 a week to live nicely...so this means that I need to buy atleast another 3 properties with mortgages paid off to live well....which means that I will never retire soley on property.

If I include mortgage repayments...well, you need something like 15 properties or more....at least.

I guess this is why people say cashflow should not be the goal of PI.

I guess Im a little shocked by just how low the ROI is in terms of real income.  

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For how long have you held the properties? And what is the CG growth during that period? ROI needs to include CG as well. CG is tax free money being compounded each year. Do not underestimate it's importance.

Cheers,
Oracle.  

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I have yet to work out why res housing is considered a "retirement vehicle".

At least Dazz makes a decent margin on his commercial stuff and once settled you would not be getting calls from your PM every week.  

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A little surprised you haven't run the figures on this sooner.

I guess it really comes down to personal circumstances and what you want to acheive with this property investing caper.

Personally I have entered this with the intention of retiring off cashflow: HOWEVER I am in my 20's and am not looking to retire anytime soon. It is easily possible for my DH and Myself to accumulate and pay off 5 IP's before we are looking to retire. We are aiming to have at least this number of properties under our belt by the end of our 30s, and have paid them off by the end of our 40's (along with our PPOR). Snowball effect.

But a lot of people don't have as much time to play with, and this is often why you will see in books the authors advise to aim to buy more and then sell some of those properties when you are looking to retire, to pay off the properties you wish to keep for cashflow. Whilst others aim solely with the intent of selling them all off and living off the profits.

So many strategies to choose from, you just need to run the figures and see what will work for you.  

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My current plan involves having 7-8, paying off PPOR and selling 3 off between the ages of 50 and 65 before Super kicks in. I'm 38 now.  

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Sunfish

If you purchase resi properties which can be developed or put DAs together I have found this to be very attractive, building equity and cashflow. Also what about chasing rising markets and aim for the beginning of the upward trend buy 2, 3 or more then offload a couple, keep a couple, once again you can do very well and does wonders for the cashflow.

If you are referring only to buying and holding resi, agreed it will hurt cashflow and may take many years before you reap the rewards.

Different strokes for different folks.

Cheers, MTR  

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You have forgotten the most important financial key to the puzzle.

Inflation.

Inflation will make your rents rise over time to a point where mortgage repayments, and otehr expenses look irrelevant.

You cant retire in 1 year from starting a property portfolio, (well not doubting anyone anything is possible) but structuring your financial independane takes time in the market....

Over time the power of inflation and compunding effects will kick in and picture will look different.

Nath.  

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DanielG said: ↑
Hi All,

I was doing some calculations over the weekend, see I have two IP's and am looking to buy my 3rd, and just as a test I wanted to see how many IP's I should have which will permit me to retire.

Here is the things...I calculated the income for the two properties for a period of 1 year...that is I removed the mortgage repayments as my scenario was that I had paid off the two houses.

Here is what I found out...when I subtracted water rates, council rates, Property management fees, insurance and repairs...my costs for the year was a whopping 36% of my income...and that was with the mortgage repayments not being counted (I would hate to think what the % would come to if I had to pay land tax as well!)

All in all, my NET income for the year was as low as $375 a week...for the two properties combined.

I am needing approx. $1000 a week to live nicely...so this means that I need to buy atleast another 3 properties with mortgages paid off to live well....which means that I will never retire soley on property.

If I include mortgage repayments...well, you need something like 15 properties or more....at least.

I guess this is why people say cashflow should not be the goal of PI.

I guess Im a little shocked by just how low the ROI is in terms of real income.Click to expand...
DanielG
What I have learnt is that you need it all, properties which will provide cashflow, capital growth and you need to be able to turn deals over so you can continue to keep investing. The hardest part is finding suitable properties so you can achieve this.

If you continue to buy the average resi property which is negatively geared your lifestyle will suffer today, who needs it, been there, done that. It was not till I starting changing the way I invested that my situation improved.

Just my 2c worth.

Cheers, MTR  

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Nathan said: ↑
You have forgotten the most important financial key to the puzzle.Click to expand...
And your costs and needs don't?

I'm an "inflation sceptic" I'm afraid.  

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So, Daniel, you think you need 5 fully paid of IP's to live comfortably? Why do you think this is not achieveable? As Nathan said, inflation works wonders over time. I am guessing that you have only been investing for a few years. Give it more time. The rewards are there, but they don't come instantly or easily.  

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There are many ways to approach this. One way would be to spend, say, 10 years building up assets. Then spend the next 10 years shifting equity from the ips to fund higher yielding assets like shares, commercial, etc. Even high yielding shares would only be slightly positive at the current mortgage rate of 6%, but a combination of dividend increases, drps and tax strategies will increase that nicely.

If you start in your 20s, you'll be generating some nice cashflow and still have a few properties to provide capital growth by your 40s. Mix and match to taste.  

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skater said: ↑
So, Daniel, you think you need 5 fully paid of IP's to live comfortably? Why do you think this is not achieveable? As Nathan said, inflation works wonders over time. I am guessing that you have only been investing for a few years. Give it more time. The rewards are there, but they don't come instantly or easily.Click to expand...
I bought two properties in 2007, so its now 3 years. I have a ten year plan which will see me with 5 properties and begin reducing my debt once the 5 have are in my portfolio.

I dont care about being rich, I just love travelling the world and enjoying life and I hate that I have to work so damn hard for it...I am 31 now and was hoping by 35 or so I would be able to see enough passive income come in where I can work just to supplement my income with contract-based work.

Someone here mentioned inflation over time....doesn't inflation only really kick in over 10-20 years?  

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How much was a paddle pop in 2000? how much is it now? Same with coke, petrol, rent, bricks, any most other tangible assets.

expenses do go up, but so do wages rents prices etc...

The one thing that does stay low is the mortgage (if you dont keep drawing the equity out..) and over time the mortgage fades to be irrelevant level.

Main key is buying the right properties with the right cashflows so the numbers will work over the years...  

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DanielG said: ↑
I bought two properties in 2007, so its now 3 years. I have a ten year plan which will see me with 5 properties and begin reducing my debt once the 5 have are in my portfolio.

I dont care about being rich, I just love travelling the world and enjoying life and I hate that I have to work so damn hard for it...I am 31 now and was hoping by 35 or so I would be able to see enough passive income come in where I can work just to supplement my income with contract-based work.

Someone here mentioned inflation over time....doesn't inflation only really kick in over 10-20 years?Click to expand...
And what is wrong with 10-20 years? Isn't that a whole lot quicker than NOT having IPs. If you are looking for cashflow, have you targeted homes that will provide for this, or have you purchased expensive properties with a 3-4% yeild?

Have you looked at options to increase the cashflow ie, add a room, add a granny flat, lease by the room, lease furnished? Of course these things may change the risk factor, so you need to be comfortable with this.

Do you have equity sitting there now ready for the next purchase? Maybe look into a regional area where you might get a better yeild and a lower entry price? There are options out there, you know.  

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DanielG said: ↑
I dont care about being rich,Click to expand...
DanielG said: ↑
I just love travelling the world and enjoying life and I hate that I have to work so damn hard for itClick to expand...
You want to travel the world by 35 and enjoy life without the need for a job, and you don't care about being rich? Not very consistent.

DanielG said: ↑
...I am 31 now and was hoping by 35 or so I would be able to see enough passive income come in where I can work just to supplement my income with contract-based work.Click to expand...
Hope? What's that? You only bought 2 IPs when you were 28, and you want to suddenly be able to choose not to work by 35? Why did you think that without having any numbers and projections to back it up?

DanielG said: ↑
Someone here mentioned inflation over time....doesn't inflation only really kick in over 10-20 years?Click to expand...
Well, yes, That's the sort of timeframe that I, at least, am operating on.  

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Nathan said: ↑
You have forgotten the most important financial key to the puzzle.

Inflation.

Inflation will make your rents rise over time to a point where mortgage repayments, and otehr expenses look irrelevant.

You cant retire in 1 year from starting a property portfolio, (well not doubting anyone anything is possible) but structuring your financial independane takes time in the market....

Over time the power of inflation and compunding effects will kick in and picture will look different.

Nath.Click to expand...
Can you give er literal examples here Nqthan ? One that you are planning on using so that I can see it in black & white rather than just being talked about.

I am still unconvinced that I will eitherr need to do something else or stretch my borrowing capacity as much as I can for as long as I can to accumulate more than I need to be able to retire on what I ight feel worthwhile an amount (unlike someone else, the quivalent of the current aussie old age pension doesn;t cut it for me).

I know your own personal investment journey is completely and very different to Daniel's buy & hold, I cant help also beleive that you chose this for a reason.

Daniel, do a search for spreadsheets and put in your numbers,you'll find a umber of them from property cotss / retirement $ calcuations / living off equity etc. I've found them quite handy for thigns like this, can help you cdouble check your own figures, take into account new strategies etc  

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Nathan said: ↑
and over time the mortgage fades to be irrelevant level.Click to expand...
It doesn't "fade". You pay as you go. Your lender adds 4% onto the inflation rate so if inflation rises, so does your interest bill.

Inflation is NOT a free lunch. You pay full price.

BTW My objection to the inflation argument is for investment prop. I am a believer in owning the house you live in, once you have settled and know where you want to raise the kids. Singles can rent, no probs.  

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I can't comment for anyone else but I can comment on my situation....

Over ten years I have managed to get a positive CF of 50-60k per annum. This comes in whether I go to work or not...my target is to get this up to 100-150 over the next 7 years...I am buying more properties faster with bigger profit margins so this time I believe I will get there a bit quicker.:D

What did I do:

1. I now buy only property which I have a 30-60k profit.

2. I aim to being properties to a positve CF situation within 2-4 years.

3. I only but stuff under 300k....amazing amount of buyers in this price range.

I too would like to do only contract work ....perhaps 2-3 days a week. In my field I could get 800-1500 per day. So it will still be a nice income.

DanielG....as the old saying goes...people overestimate what can be achieve in 1-2 years....but grossly underestimate what they can achieve in 10 years. It is only a small change in mindset really.;)

Best of luck!

DanielG said: ↑
I bought two properties in 2007, so its now 3 years. I have a ten year plan which will see me with 5 properties and begin reducing my debt once the 5 have are in my portfolio.

I dont care about being rich, I just love travelling the world and enjoying life and I hate that I have to work so damn hard for it...I am 31 now and was hoping by 35 or so I would be able to see enough passive income come in where I can work just to supplement my income with contract-based work.

Someone here mentioned inflation over time....doesn't inflation only really kick in over 10-20 years?Click to expand...
 

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sash said: ↑
I can't comment for anyone else but I can comment on my situation....

Over ten years I have managed to get a positive CF of 50-60k per annum. This comes in whether I go to work or not...my target is to get this up to 100-150 over the next 7 years...I am buying more properties faster with bigger profit margins so this time I believe I will get there a bit quicker.:D

What did I do:

1. I now buy only property which I have a 30-60k profit.

2. I aim to being properties to a positve CF situation within 2-4 years.

3. I only but stuff under 300k....amazing amount of buyers in this price range.

I too would like to do only contract work ....perhaps 2-3 days a week. In my field I could get 800-1500 per day. So it will still be a nice income.

DanielG....as the old saying goes...people overestimate what can be achieve in 1-2 years....but grossly underestimate what they can achieve in 10 years. It is only a small change in mindset really.;)

Best of luck!Click to expand...
Great...this was exactly what I was looking for. Is the 50 - 60K NET or GROSS income?  

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DanielG said: ↑
Great...this was exactly what I was looking for. Is the 50 - 60K NET or GROSS income?Click to expand...
Being CF+ it would be net.

It is quite easily achievable, but as I said before, you have to be in the market for enough time for inflation to do it's magic. Most of my rents have gone up $100pw in the last couple of years. Seeing as the portfolio was more or less neutral, that is an extra $100pw cashflow for each IP.:D  

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