澳洲Australia property How many properties to retire? | Sydney


在澳大利亚 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 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


Interesting question:

How many properties, or more accurately, what level of gross income, do people think that is a to comfortable to high level to retire on?  

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Sort of depends whether you want to be living in an ex housing commision in logan or a waterfront in Clareville.


see change  

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Hiya

A common figure that my clients come up with is their current income net of tax. Its easy and they know they can have a reasonable life with it even with kids.

Ta

rolf  

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I think if ya first answer the questions below, then the number of properties will answer itself.

1) How much income / backing do you want to retire on?
2) How soon?  

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Whatever the correct amount is, for any idividual:

CAN YOU ACHIEVE IT IN 10 YEARS???


Regards,

Steve  

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Looks like it will be 11 years now Steve :(

I have been waiting for a year ;)

Cheers

Phil  

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Originally posted by Phil_H
Looks like it will be 11 years now Steve :(

Click to expand...

No no no, make that 8 years in your case Phil, you musta forgatten about 'Value Adding' with the shares :D

Steve  

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Steve,

What is the basics of the ten year game plan you would recommend to your clients, what is the processes of the strategy?
--Unfortunately I cannot go to your course(s) as I live OS.


Now Im 35 and want to retire in 10 years on approximately my post-tax income ( and with good prospects of tracking or exceeding CPI increases for life). My goal was/is to use buy and hold IP, and in 10 years generate a net 3% profit ( this is based on the fact that an IP I purchased 10 years ago is now earning 3% clear), thus if I want to retire on $150K Aussie/year I would need to own a whopping $4.5M worth of property (or from my current base and about 350K a year for the next 10 years). Simple plan...but unforturnately difficult to execute, and especially in the current environment.


However I think to retire in reasonable comfort then I think the following wouldnt be bad "Own your own home plus AUD$2000/pw in 2003 dollar terms". This enables the family to take extended OS holidays economy class, a new aussie made car every 5 years, nice foods and good bottle of wine most nights!  

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Hi A.L.

Yes you can achieve what you are saking for!

I'm hopping on a plane for Melbourne in 2 hrs time, so can't do you the justice of a full response now.

However: After the Melbourne Course I will try to give you some structured detail.

Regards,

Steve  

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Steve's Response

Steve,

I would be interested in your response as well.

Tim  

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Steve's laid it all out once or twice before - try a search on navra, rental reality and cashbonds.

Also, check out his site. It has heaps of info.

Jas  

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Hi Tim,

I think $500 per week nett would be a bare minimum for my family but $1000 would mean we get to eat out a bit and have the odd trip away.

$2000 per week in rent is my goal...and I only intend to do all of this once so will be fairly conservative.

Glenn  

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I would need in 10 years $50K net in todays dollars (that is $75 in tomorrows dollars). If my conservative investment in retirement returns 5% I will need just $1.5 M in investment equity (IE). I calculate my current position as:

current value of all investments (IPs and others, but not PPOR)

less total amount borrowed

plus difference in value between the current PPOR and the current value of future retirement place (which may be more or less expensive than you current PPOR)

Currently I'm in the positive territory. Just.

Cheers,

Lotana  

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Originally posted by Glenn
Hi Tim,
$2000 per week in rent is my goal...and I only intend to do all of this once so will be fairly conservative.

Glenn
Click to expand...

Hi Glenn,

Have you spreadsheeted this out, I've come to the conclusion that retiring on rental income alone is a massive task that would take 20+yrs to execute against. Do you understand the enormity of the task you've set yourself?

I'm settled on borrowing against increases in equity in order to retire in 5-6yrs (started 4yrs ago), like you I need around $2K pw.


Duncan.  

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Hi Duncan,

I did not suggest that $2000 per week net of borrowing was my goal, just $2000 per week.

My snowball is not huge at the moment but is gathering pace.

Glenn  

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It all depends on how you live. My grandmother went around the world twice on the old age pension.

Jas  

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My retirement weekly money would have to be $1,500 nett per week minimum. That's $78,000 nett earnings a year at 5% . So I would need $1,500,000 plus, in the "bank".
Property alone isn't going to do the trick! The property is only going make the "kids" wealthy.
You will need a hell of a lot of property to live off the rents. By the time you cover all expences, property manager, insurances, taxes etc.
Managaged funds and super are all going down the toilet, so with a little care, maybe the right shares will help.


bbruham  

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There is retirement and there is retirement.

$500/week would mean I could quit my current job and just do interesting work, bits and pieces, as I wanted.

$500/week would mean I would have approx 2 days/ week to spend on researching property / business / shares / etc. Just imagine a 4 day weekend to hunt for props every week!!!

No, $500/wk is not a retirement income in that I cant sit on a beach and do nothing. However it gets me out off the 'rat race'.

$500/wk nett = approx. 3 fully paid off units? Or
= approx. 2 fully paid off houses? Or
= some other formula depending on what you buy and where.

I think both are achievable in a short(ish) time frame.

Good luck all

TheBacon  

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Sounds good to me

The Bacon,

that's what I have pretty much come up with. Around $500 per week gets you 'off the rat race', and is the minimum you need to break free to do better things.

Tim  

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A LENGTHY reply

Originally posted by Tim & A.L.
Interesting question:

How many properties, or more accurately, what level of gross income, do people think that is a to comfortable to high level to retire on?

Now I’m 35 and want to retire in 10 years on approximately my post-tax income

My goal was/is to use buy and hold IP, and in 10 years generate a net 3% profit

thus if I want to retire on $150K Aussie/year I would need to own a whopping $4.5M worth of property . . . unfortunately difficult to execute

Click to expand...
Hi Everyone,

Firstly let us establish the required retirement income:

A.L. would like $150,000 pa in 10 years time and with inflation at say 3% the future dollar amount would need to be: $201,587 pa

I will assume that this is Gross Income, so the net of tax income required will be $105,832 (Reduced by 47.5%)

Two points to digest:

Firstly it is twice as difficult if you are trying to create your income out of a taxable income source, example of this is the rental income you might receive from your properties after expenses. (Strangely enough though this is what most of the books teach you to do.) The result of course is the Whopping $4.5M required, which clearly is very difficult.

Positive income from an asset source, is unfortunately fully taxed. (Hence the difficulty.)

The second point is that structure can allow your dollar to work multiple times simultaneously.

Example: Assume A.L. has over the next ten years managed to build up a property portfolio of $2,200,000 gross value (Less than half of the whopping 4.5M) with an LVR of 63% (Net equity of $814,000)

This is all that is required to give A.L. his $105,832 pa after tax; suddenly NOT so difficult.

So HOW to achieve this???

Buy a property today for $450,000 (Ah YES 25% above the median of the city say Melburne)

Now we know that Melbourne has averaged in excess of 7% capital growth over the last 10 years, BUT hey these are uncertain times and maybe we are at the top of a cycle etc, etc. I am suggesting that if you apply rental reality, you will NOT overpay for the asset and if you follow the correct criteria you will very likely achieve the 7% irrespective of the current cycle position. HOWEVER, for the cynics out there, I will assume that you refuse to follow my criteria, so let us assume a capital growth pa of 5% (If you get a lesser return than this, you are definitely doing something very wrong!)

So at 5% pa growth, this Property will be worth $733,000 at the end of 10 years.

Better than this, is the fact that at the end of 3 years the property will be worth $520,000 (Also at 5% pa growth) which means that you have gained $70,000 in equity, which is enough to cover the deposit and costs to buy property number two for $520,000.

It gets even better, because two years later both these properties should be worth $574,000 (still at 5% pa growth) which is an equity gain of $54,000 X 2 = $108,000:

So with a very self satisfied smile go out and buy property number 3 for $574,000.

Note: This occurs at the end of year 5: Now all you have to do is hold the three properties for the next 5 years and if they continue to grow at 5% pa, you are home and dusted.

3 properties each worth $733,000 = $2,199,000

Total DEBT = 90% of each purchase price: $450,000 + $520,000 + $574,000 X 90% = $1,389,600 (LVR of 63%)

SOLUTION: Approach reputable bank and ask for an 80% LOC facility against your total equity: $2,199,000 X 80% = $1,759,200 Less of course the existing debt of $1,389,600 = $369,600.

Buy an income stream (Cashbond) with the $369,600 for three years:
Will provide an income of $123,200 pa (Capital return tax free)
And interest portion of $3,499 pa interest ( which is taxable) X 47.5% = $1,811 after tax.

Total tax free income: $125,011 (You smiling yet A.L. ??)

However, let us not forget that there is a cost for using the $369,600 at say 6.5% = $23,998 pa

So your net of tax living income will be $125,011 - $23,998 = $101,013
Which is equivalent to $212,658 taxable = $158,23 in today’s dollars (3% inflation)

See it is soooooo EASY!

NOTES:

1) You might be asking what happens at the end of the three years, when you have spent the money?? Well $2,200,000 of property growing at 5% pa = $110,000, which is MORE than you are spending each year, so at the end of the three years your properties will have grown by more than you have spent. You can then draw down the equity and buy yourself a further income stream . . . and eventually it goes to your kids.
2) What about serviceability? The cashbond creates serviceability beyond what you will need to continue this process.
3) What happens if my property grows at less than the 5%: Spend less!
4) What if my properties grow at greater than the 5%: Spend more, or save the extra for a year when it might be lower.
5) If the projected property growth is 7% (Yes you got all the selection criteria correct) your income level will be nearly DOUBLE!!
6) If you ‘Value Add’ with shares for example your income will be nearly TRIPLE!
7) Can you do this?? ONLY if you want to . . .

Hope this is of interest,

Regards,

Steve

DISCLAIMER: THIS IS NOT ADVICE, RATHER IT IS MERELY AN EXAMPLE OF HOW INVESTMENT STRUCTURE CAN WORK.

PLEASE CONSULT A LICENSED PLANNER FOR ADVICE BEFORE CONSIDERING SUCH PLANS  

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