$100,000/pa Passive Income...

I come across A LOT of new investors that have the dream to own "10 properties in 10 years" ...OR they wan't $100,000 of passive income when they retire.

These are both extremely ambitious goals and out of 500+ clients I've only a handful that have had the tenacity and determination to secure 10+ properties in 5 years or so years.

With that said though, it is definitely possible for anyone who is committed enough to achieve.

Please see the below reply to another thread and contribute your thoughts on strategies that suit the below overview.

If you disagree I'd love to hear your challenges too.

Okay so let's look at your long term goal... $100,000 in today's money of passive income from property in XX years.

Considering that (generally speaking) property yields about 5% in most capital cities you're going to need +$2,000,000 of property owned outright or $4,000,000 - $5,000,000 of property with a variety of LVR's against each asset.

So you could simply say you're going to acquire 12 properties at $450,000 over XX years, after which you'll either keep and pay down or sell off assets to reach your desired income. The problem you will face along the way will be inflation and as such you'll actually need to increase your purchase prices as time goes by, but I digress...

To get to that goal $100k within XX you're going to need to focus on rapid acquisition of property. There are a variety of strategies to do this which I'm sure will be talked about further by others.

The basic keys to rapid acquisition are:
1. Compounding Capital Growth (CCG)
2. Add Value (Reno, Paper gaining and Development)
3. Buying below market value

The basic limitations to rapidly acquiring property are:
1. Serviceability (Gearing, Cash flow, Risk)
2. Finance
3. Market forces

So essentially you want to focus on a property that will give you all three key components with a focus on growth (as that's the strongest performing aspect) whilst enabling you to mitigate the restrictions and limitations aforementioned.

The best way to achieve this is to:
1. Buy in an area predicted for strong CG (Elwood and St Kilda are good)
2. Buy something that can have value added to it.
3. Buy an off market property so you can negotiate a below market price.

Then once you've found a short list of properties that suits the above focus on mitigating the restrictions by:
1. Maximising rental income. (Renovation, multiple renters, short stay accom, etc)
2. Maintain a conservative LVR (less than 80%)
3. Purchase in areas with proven histories.

As you grow your portfolio you'll come to understand that managing the overall growth is quite complex and there are a lot of factors and details to be managed. The more tenacious and hands on you are the more success you'll likely achieve.

I think your initial budget should be close to $550,000 rather than $450,000 in Melbourne. Even though you're spending more you're actually being more conservative due to the increase in quality...

As far as data goes, just buy your investment magazines, they have the basics.

Get a good mortgage broker, Jo Attard & Co or Sage Lending are two I'd recommend. They can give you access to special property reports.

Lastly I cannot stress how important it is to have the correct financial structure in place. DO NOT borrow through your bank, use a good broker. Also, once you've started to build your portfolio, enlist the help of a good financial planner and accountant that can help you look after the details.

Good luck
 
Hi Jake

A few other options for speeding up the process that you missed:
- Get a higher paying job - it increases your servicing and you can save deposits faster, all in one package
- Reduce your living expenses and save more for the next deposit
- Buy assets with better yields - eg 9%+ net yields on CIPs, which increases your take home income rather than reducing it, allowing you to again improve servicing and save deposits faster for the next one

I know this is all kinda obvious but I figure it's worth mentioning. I know a lot of people say that you can leverage RIPs more (and it's true) but a high net yield does wonders for your ability to save the next deposit, while a low one becomes a real drag...
 
get rid of the financial planner

With the goals you stated, the individual needs to take on the role of Financial Planner themselves and NOT fob it off to some desk jocky.

Cheers
Graeme
 
With the goals you stated, the individual needs to take on the role of Financial Planner themselves and NOT fob it off to some desk jocky.

Cheers
Graeme

Yes, you need to be the financial planner, I have yet to meet one who has retired on $100,000 passive income;)
 
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My goal is actually $100k per year in 2011 dollars. I'm aiming to achieve this by 2022. I'm just waiting for my fourth IP to settle and I'll then jump straight into number 5.
I will need at least 12 properties to get the cash flow I want, but two of my properties are great for future townhouse developments. The first will hopefully happen in five years or so and be three townhouses or four units. Obviously the details might change a bit, but it's still good to have a plan.
 
The best way to achieve this is to:
1. Buy in an area predicted for strong CG (Elwood and St Kilda are good)
2. Buy something that can have value added to it.
.

Strategizing important - get the right mix, and time the market, watch out for rising markets and jump in, buy as many as you can, then perhaps sell 1 and reduce debt.
 
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I know several, including several in there early forties, they still work as they like what they do

Hi Shanelastic

I have yet to read a post on SS recommending any gun financial planners, why?? cos they don't exist, they are sales people selling a product.

I would not trust any financial planner with my investments, regardless of whether they have retired or not. I think many new investors are under the illusion that these people will actually provide strategies and most are not skilled/experienced property investors, save your money

MTR
 
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If you really must have a financial planner then get an independant one.
http://www.superguide.com.au/how-super-works/truly-independent-financial-advisers-in-australia

Independant Rules:
  1. You can’t be affiliated with a bank, insurance or investment company (that is, a product manufacturer).
  2. You can’t receive commissions of any sort – including insurance commissions – unless you refund them in full to the client.
  3. You can’t charge asset-based fees (that is, a percentage of client assets under advice or under management).

  • Trent Alexander, Financial Planning Expert, VIC
  • Daniel Brammall, Brocktons Independent Advisory, ACT
  • Fergus Hardingham, FM Financial Solutions, NSW
  • Susannah Kulincevic, Brocktons Independent Advisory, ACT
  • Travis Morien, Australian Independent Financial Advisers, WA
  • Michael Radalj, Eclipse Financial Advisers, NSW
  • Bill Raffle, Bennelong Private Wealth, NSW
  • Matthew Ross, Roskow Independent Advisory, VIC
  • Neil Salkow, Roskow Independent Advisory, QLD
 
Hi Shanelastic

I have yet to read a post on SS recommending any gun financial planners, why?? cos they don't exist, they are sales people selling a product.

I would not trust any financial planner with my investments, regardless of whether they have retired or not. I think many new investors are under the illusion that these people will actually provide strategies and most are not skilled/experienced property investors, save your money

MTR

Hi MTR,

so you are saying that they dont exist? as I said I know several, self made wealthy FP,not through commissions, through good investing but i guess you can believe what you hear
 
10 in 10, Ive done it as well.... Ive posted extensively on our CGA Investment Property Strategy over the years. There's a link to it in my profile if you're interested.
 
Over 10 in under 10. But hey, this is a property investing forum, so you shouldn't be surprised to have more than a few of us with those numbers.
 
Hi Shanelastic

I have yet to read a post on SS recommending any gun financial planners, why?? cos they don't exist, they are sales people selling a product.

I would not trust any financial planner with my investments, regardless of whether they have retired or not. I think many new investors are under the illusion that these people will actually provide strategies and most are not skilled/experienced property investors, save your money

MTR
Almost no FP's will advise you to go out and buy a totally independently selected IP.

Maybe a development project (that they're involved in, no doubt) but usually just some managed fund etc.
 
I know several, including several in there early forties, they still work as they like what they do

Why would they retire, How hard could it be telling other people how to spend their money, have the thrill of the chase, be occupied and have a reason to get out of bed, and not have there own head on the chopping block. If they retired they would have to work harder to ensure capital preservation do a lot more due diligence, research, buffering and worrying . It is harder investing your own money when it is your own belly that maybe empty.
 
Now it has become a discussion about financial planners :rolleyes:

My posts were moved to the other thread but I still think they are relevant to this one.

There is no way we would be able to begin our property journey in inner city (or even outer city :eek:) properties with a buy in price of over $450K at 20% LVR.

I do think anyone can reach their goals if they tailor their strategy to fit. For example, our buy in price is sub $300K with a 90% LVR focussing on cashflow and the ability to manufacture CG.

The thing that is 100% necessary for getting into property (and staying in it long enough to make a difference) is getting a job that the banks will like, even if you don't IMHO.
 
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