澳洲Australia property Not sure if residential property will do


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,

Have been reading plenty of threads. Stacks of info and a great place to learn.

However, I am not sure if investing in residential property is going to get me to my goal?

I am 45 years old. Earn a steady 85Kgross a year. Owe 260K on my PPOR which is valued at 700K. No other debts.

My goal is to match the equivalent of my current income in 15 years time but in a 100% passive form.

Will investing in residential property get me there?

Should I be focusing on other investment vehicles like shares, super to get me to my goal?

If residential property is the way, then how would you go about reaching the sort of goal I have set for myself given my starting point?

JSilverman  

评论
geez louise - i don't mean to be rude, but honestly, how can you expect someone to answer that?

are you interested in capital growth or cashflow to replace selling your time?

are you willing to draw on your equity to fund the venture?  

评论
Can I make a few non-helpful observations? :eek:

Silverman said: ↑
I am 45 years old.Click to expand...
Why is it that we all wait until the mid-40's to see if we are going to make it in retirement? Then discover that our $85K a year job and no investments is not going to cut it.....and then start to panic? :rolleyes:

Silverman said: ↑
Earn a steady 85Kgross a year. Owe 260K on my PPOR which is valued at 700K. No other debts.Click to expand...
OK, good work on the no other debts. Bad work on the no other assets.

Silverman said: ↑
My goal is to match the equivalent of my current income in 15 years time but in a 100% passive form. Will investing in residential property get me there?Click to expand...
OK so now we have to come up with a 15 year guaranteed plan that allows for no mistakes whatsoever, or you'll blow it :rolleyes:

Silverman said: ↑
Should I be focusing on other investment vehicles like shares, super to get me to my goal?Click to expand...
Perhaps should have focussed on these in your 20's & 30's?

The other problem you're going to have is that at 45 yrs you have a head full of experience on what does not work and why it can't be done that has to be fixed first before you can get your head straightened out.

Apologies for all that - have a guess how I know all that stuff? :eek:  

评论
Never too late to start I say because you can then help the ones around you that are important to you.

Can someone please spare a few lines and teach me how to multiquote like the above post. That would be much appreciated. Thanks in advance.  

评论
Propertunity said: ↑
Perhaps should have focussed on these in your 20's & 30's?

The other problem you're going to have is that at 45 yrs you have a head full of experience on what does not work and why it can't be done that has to be fixed first before you can get your head straightened out.

Apologies for all that - have a guess how I know all that stuff? :eek:Click to expand...
Very "superior" attitude Propertunity. From someone, who like a lot of other long time Somersofters, has made a lot of money on large, and VERY easy capital gains the past 10-15yrs. Very easy money, no skills required. 300% gain!!.

So please enlighten us with your wisdom Propertunity. Silverman, use the $400K equity on 4 investments ($400K each). Propertunity will tell you that property easily doubles every 7yrs, so in 15yrs (thats x4). Therefore your $1.6mil property investment will be worth $6.4million. Then retire happy. Easy, just ask Propertunity. :p  

评论
Any good financial planner will give a free introduction consultation so make an appointment with half a dozen and see who you are comfortable with as well their fees.

They will lead you a more structured and balance portfolio and advise if your goal is achievable and if so what areas of investment to use,

Good Luck with everything.  

评论
45 is still way early enough to set up for retirement!  

评论
Silverman said: ↑
However, I am not sure if investing in residential property is going to get me to my goal?

Should I be focusing on other investment vehicles like shares, super to get me to my goal?Click to expand...
Ideally, you should focus on a mixture of asset classes and not put all your eggs in the one basket. So yes to property, shares, super (though, I'm not a particular fan of super), and there are also other asset classes as well.

The benefit of property is that you can leverage more than other assets, so use your equity more effectively (and they don't margin call property!, as they do when your leveraging for shares). But at your age, you may want to maintain a lower LVR (loan-value-ratio), to avoid being wiped out if you run into any unexpected events (that is, nothing at 90% LVR, etc).

Start initially with one investment property, find your comfort level. Then grow from there. You still have plenty of time to set yourself up for retirement.  

评论
You've got enough equity there to get into a commercial property. Just sayin'. If I had that much equity, I would skip resi and go straight to commercial.  

评论
Silverman said: ↑
Hi all,

Have been reading plenty of threads. Stacks of info and a great place to learn.

However, I am not sure if investing in residential property is going to get me to my goal?

I am 45 years old. Earn a steady 85Kgross a year. Owe 260K on my PPOR which is valued at 700K. No other debts.

My goal is to match the equivalent of my current income in 15 years time but in a 100% passive form.

Will investing in residential property get me there?

Should I be focusing on other investment vehicles like shares, super to get me to my goal?

If residential property is the way, then how would you go about reaching the sort of goal I have set for myself given my starting point?

JSilvermanClick to expand...
Retirement is invetable

You will age

Medical costs will rise in the future

...great to see you're exploring options; I don't have the answers but I'm looking :D

Suggest we look at those that have retired including forum members  

评论
bluestorm said: ↑
Very "superior" attitude Propertunity. Click to expand...
I think you have to learn to read between the lines blue. When I said "have a guess how I know all that stuff?" it was a reference to myself having been in exactly Silverman's predicament.:cool:

bluestorm said: ↑
From someone, who like a lot of other long time Somersofters, has made a lot of money on large, and VERY easy capital gains the past 10-15yrs. Very easy money, no skills required. 300% gain!!.Click to expand...
Yep, it was all easy. No-one around then preaching D&G :rolleyes:  

评论
Silverman said: ↑
Hi all,

Have been reading plenty of threads. Stacks of info and a great place to learn.

However, I am not sure if investing in residential property is going to get me to my goal?

I am 45 years old. Earn a steady 85Kgross a year. Owe 260K on my PPOR which is valued at 700K. No other debts.

My goal is to match the equivalent of my current income in 15 years time but in a 100% passive form.

Will investing in residential property get me there?

Should I be focusing on other investment vehicles like shares, super to get me to my goal?

If residential property is the way, then how would you go about reaching the sort of goal I have set for myself given my starting point?

JSilvermanClick to expand...
Dividends Capital Valve Year


$188,851.19 $4,436,346.33 2009

$201,487.81 $2,155,010.57 2008

$182,093.61 $2,805,379.74 2007

$152,502.53 $3,405,435.97 2006

$128,359.14 $2,859,737.32 2005

$113,453.87 $2,225,679.65 2004

$91,039.51 $1,868,674.52 2003

$83,607.71 $1,379,527.20 2002

$72,710.27 $1,708,691.32 2001

$66,689.47 $1,581,053.53 2000

$56,341.28 $1,196,394.84 1999

$48,877.32 $1,151,436.91 1998

$45,374.68 $803,398.81 1997

$37,349.47 $519,157.68 1996

$31,441.00 $381,893.17 1995

$21,555.68 $320,461.09 1994

$14,318.94 $266,264.14 1993

$12,951.81 $244,789.16 1992
$181,972.89
$215,000.00 1991

Above shows one of our banks with all dividends reinvested over the years through the DRP it was started with $215K. There are lots of good companies out there (and bad ones) you deal with them every day.

And remember 30% tax is already paid fully franked.

(My apoligies for the layout)  

评论
Nice growth in 2009!  

评论
Inflation in Australia has averaged around 3% over the last 10 - 15 years, and wage growth has been (I think) somewhere around 3.5%. So in rough figures, you'd be looking at $130K to $140K per annum in fifteen years, assuming that inflation continues at a similar rate over that time.

Assuming that you can get an index-linked return on investments of around 5% then you'd need $3 million in 2026, and possibly as much as $4.5 million. Though that assumes you're not eating your way though the principle's equity.

I plugged some numbers into a calculation, with the assumptions:
  • You put half your salary into investments.
  • Your salary grows by 3.5% per annum.
  • Your investments grow by 10% per annum. (The long-run growth of the Dow Jones index.)
After 15 years your savings would be worth $1.6 million, somewhere between a half and a third of what you're looking for. After 20 they'd be worth just over $3 million, and after 25, $5.5 million.

If you want a higher return than the stock market then either you need to be a financial genius (most professional fund managers don't match the overall growth in the market over the long term, though I'm sure that most posters on Internet boards do :D), or take bigger risks.

There are investors on this board who have built up the sort of sum that you're looking for through investment properties. But, as Bluestorm pointed out, that's off the back of ten to fifteen years of house price growth running far ahead of incomes. I'm a nasty Doom and Gloomer, so don't think that's sustainable over the next fifteen.

The sort of thing that might return the sort of sums that you're looking for is your own business, though the stats there aren't great. (Between 50% and 95% fail within five years.) It could be property related (renovations, landlord, etc.) or something else entirely, depends on your skillset.

Edited to add: There are different reasons for businesses closing, and according to this article, one study into start-ups found that only around 5% closed due to bankruptcy.  

评论
intrigued said: ↑
Above shows one of our banks with all dividends reinvested over the years through the DRP it was started with $215K. There are lots of good companies out there (and bad ones) you deal with them every day.Click to expand...
Come-on intrigued, advise but don't spruik it, like the others spruik capital gains in property (but fail to mention a huge spike the past 10-15yrs). CBA listed at 5.40. And is now at $51.00 in 18yrs, during a big boom.

Are you suggesting that CBA will reach $510 by 2028, and that someone can now replicate your gains. Or that the markets in general will have a similar boom rise as the past 18yrs.

Silverman, this is what you should be aware of and also factor in an mitigate risk for (2006-2008). It can be replicated in 2011/2012. The markets will come back again.

$201,487.81 $2,155,010.57 2008
$182,093.61 $2,805,379.74 2007
$152,502.53 $3,405,435.97 2006


Propertunity said: ↑
Yep, it was all easy. No-one around then preaching D&G :rolleyes:Click to expand...
Don't say you were not warned Propertunity. People will have had 2yrs to prepare.

There is a long and interesting piece in the SMH this morning.
Europe just may escape its debt disaster … and pigs might fly

Portugal is now telling everyone that it is neither Greece nor Ireland. Spain insists that it is not Greece, Ireland or Portugal. Italy insists it is none of the above, as does Belgium, which also wants the world to know it should not be confused with Italy. :rolleyes:Click to expand...
China, which contributed about 80 per cent of global growth last year, has expressed concern about Europe.

China is also a major holder of euro sovereign bonds. China has indicated preparedness to use some of its $US2700 billion of foreign exchange reserves to buy bonds of countries such as Greece and Portugal.

A slowdown in China would affect commodity markets and exporters such as Australia and South Africa.Click to expand...
 

评论
Silverman said: ↑
Hi all,

Have been reading plenty of threads. Stacks of info and a great place to learn.

However, I am not sure if investing in residential property is going to get me to my goal?

I am 45 years old. Earn a steady 85Kgross a year. Owe 260K on my PPOR which is valued at 700K. No other debts.

My goal is to match the equivalent of my current income in 15 years time but in a 100% passive form.

Will investing in residential property get me there?

Should I be focusing on other investment vehicles like shares, super to get me to my goal?

If residential property is the way, then how would you go about reaching the sort of goal I have set for myself given my starting point?

JSilvermanClick to expand...
Hi JSilverman,

Silverman said: ↑
how would you go about reaching the sort of goal I have set for myself given my starting point?Click to expand...
I'd argue that the possibility or not of your goal has no much to do with your starting point (which is not so bad) but, it is within yourself. A this stage, I'd suggest that rather than focus on current body age and equity, you should focus on changing your financial paradigm. It is by far the most simple and at the same time difficult task you should do. It is only after you do the mental transition or paradigm change that all your questions will be answered. It all will make sense and that you will be able to navigate through all the financial, legal and accounting jargon. You will be able to find what works for you. Until then, I'd suggest not to touch your current equity and try anything. It risk losing it and/or losing the opportunity of what could it be if done differently.
In order to start the task before you, at this stage the only thing you need is to want it very badly. Thus, how badly you want it?

Good luck!
PS. You're at an age in which you should be able to dance like noone was watching :cool:  

评论
OK Silverman, if I were in your shoes, here's what I would do:

1) Immediately sit down and budget, trying to release as much cashflow as I sensibly could (you still need to live though). You'll need several hundred dollars a month.
2) Hunt around and find two well priced properties in reasonable areas, that have sufficient yield to cover most costs straight away (this will take some effort, but it is possible, and make sure its an area with rental demand). Buy these properties using deposit by redrawing from your PPOR equity (say $80k per property).
3) Open a managed fund (probably an index fund) with say $50k of equity redrawn from your PPOR, and commit to making a monthly/fortnightly contribution each time you get paid. Pay the interest out of your pocket, but reinvest all dividends.
4) When you get your tax return each year, use it to reduce your PPOR debt, or to support your investment holding costs.
5) Plan to make larger than standard payments on your PPOR (even if just by a bit). Between this and sometimes depositing your tax return to your PPOR loan, plan to have the PPOR paid off completely within 10 years.

After a few years, the rents on the two IPs should have risen enough such that they are cashflow positive. Use this extra cash to pay off your PPOR. Once your PPOR is paid off, use the $$ you were paying off your PPOR to top up your share fund (or, depending on your accountant's advice, your superannuation).

This strategy is probably a bit more conservative than some here would suggest, but with the amount of working years you have remaining, I wouldn't be suggesting any big risks. Using this strategy, in 15 years time you should have a fully paid off PPOR, two IPs with significant equity (at least 50% of the value of the two properties) a shares fund worth a few hundred thousand dollars and whatever is in your superannuation. This may not replace your current working income, but should get you more than half way there. You then have the option of working a few more years to continue topping up the investments, or downsizing your PPOR to release some more cash, or both.

Whatever happens, you'll be better off than if you did nothing, and probably better off than simply sinking unleveraged $$ into super.

Just my $0.02 - I'm not a financial advisor so feel free to criticise and/or ignore!  

评论
Silverman,

How much do you have in super?

At 45, with a plan to retire at 60, you need to ramp up your super contributions.

Also, check what your preservation age is, it may or may not be less than 60.

I think you need to use a combination of strategies, but biased towards higher dividend paying shares.

If you want passive, I would invest in LICs like AFI, ARG, MLT.

I would use these over index funds as the dividends here are more stable and less volatile.

Someone mentioned commercial property, I don't think that's appropriate for someone in your position.

You probably need to see a good financial planner with a good understanding of superannuation strategies.

Residential property may also be useful, but to a lesser degree.

Maybe a place you could "downsize" to later on after selling your PPOR CGT free later on.  

评论
And the 80k gross income you have now you pay tax on, in super it is tax free.

So you actually need much less than 80k income in super to give you the equivalent net return.  

评论
I agree that starting at age 45 makes super a more attractive vehicle because of the tax free status after the preservation age.

However, do keep in mind that super limits leverage, especially refinancing.

If I was approaching this, I'd calculate how much I needed to generate 85k at retirement, determine when I want to retire, and what my starting point is. Then keep rejigging the numbers until they somehow work. Then at least you have a plan. It might not work out, but you have something to go on.

Your problem, Silverman, is likely lack of knowledge. Do you know what returns are realistic with the different asset classes?  

Property Investment

Australia property Selling Hints | Sydney

澳大利亚Hi folks I recall ready somewhere about what are some simple tricks for making your place more attractive during a home open. Im seriously thinking of selling my little pad and want to maximise my efforts. Any hints greatly appreciated. 评论 ...

Property Investment

Australia property Re-zoning | Sydney

澳大利亚What would the chances of a NSW Local Council allowing a community titled development (homes, community buildings, etc) on an area zoned Protected Agricultural land? Does anyone have experience in this area? Looking at the local council LEP, ...