Am I doing this right?

I've just bought my first investment property a few months ago and I'm now trying to project what will happen in the future regarding income and also how to work out my property goals. My original thoughts were that I would like to buy 10 properties over 10 years and that would enable me to be financially free. I was hoping that would give me about $100,000 income per year, which I think would be sufficient.

I've just pulled out a pen and paper to do a quick projection and I'm wondering if anyone can let me know if I'm doing this right or not.

Currently my property is worth around $400,000 and lets say that I bought another property per year for the next 9 years at the same figure. I've calculated that if the properties were to rise by 5% each year consistently then the first one would now be worth approx $650,000 in the ten years, the second would be $620,000 and so on till the last one is worth $420,000.

This would be a capital growth of about $1,275,000 over all properties for the 10 years. Now assuming that my rental return was about 5% of the above figure I would have a cashflow of $63,750.

From the above demonstration it looks like I will be short of my goal of $100,000 per year passive income and therefore 10 properties is not going to be enough.

Can anyone let me know if I'm actually working out the future income correctly? I'd like to put a plan in place which will enable me to achieve the desired income and looking for some tips on how to go about this.

Thanks.
 
A couple of other things you may have not considered.

Are all the properties going to be zero or positive geared? If they are neg geared in the begining you will be using income to pay interest.

Have you considered inflation? Your desired $100k income will be worth considerably less in 10 years.

I hope you dont think I am being very negative here, just pointing out other real costs. Ten properties in ten years is doable for many people but most wont be clearing 100k on rent. I think it may take longer to get the income, maybe 15 to 20 years on rent alone. Fortunatly there are other ways of making it work.

Many do reno's or subdivides to increase wealth and income. Personally, I like my "Lazy" way, but it takes 15 years.
 
A couple of other things you may have not considered.

Are all the properties going to be zero or positive geared? If they are neg geared in the begining you will be using income to pay interest.

Have you considered inflation? Your desired $100k income will be worth considerably less in 10 years.

I hope you dont think I am being very negative here, just pointing out other real costs. Ten properties in ten years is doable for many people but most wont be clearing 100k on rent. I think it may take longer to get the income, maybe 15 to 20 years on rent alone. Fortunatly there are other ways of making it work.

Many do reno's or subdivides to increase wealth and income. Personally, I like my "Lazy" way, but it takes 15 years.

Thanks Peastman, Don't think you're negative at all. That's actually what I'm looking for. I've read a few books but just want to get some actual feedback from people who are already doing it.

Currently my first property is neutrally geared and I have about $80,000 equity in it. Over the next year or two as it becomes positive I believe the income from it will pay towards any of the negative gearing of the other properties. As this carries on for a few years the others will turn positive.

I guess I would like advice on how I can make the $100,000 passive income (after tax). I feel that I'm in a good place right now and want to make sure I make good decisions ;)
 
Currently my property is worth around $400,000 and lets say that I bought another property per year for the next 9 years at the same figure.
Another thing to keep in mind is that as your $400K property is rising in value (assuming it does), so too are your buying costs for the next IP.

Regards
Marty
 
I'm not sure residential property is the right vehicle for cashflow generation.

RIP has shown however to be a good vehicle for equity creation. Past results do not imply future results however.

The approach which has worked well for many is the creation of equity through RIP, then using that capital to generate cashflow through other investments (CIP, listed shares, private business).
 
Thanks for your input guys. I've actually just found the Somersoft Spreadsheet Collection thread by James. I think this is just what I'm looking for. There is lots of spreadsheets for me to look through and i'm sure they will help me get a grasp on future projections. I'll start there and let you know if I need any more help. ;)
 
Thanks for your input guys. I've actually just found the Somersoft Spreadsheet Collection thread by James. I think this is just what I'm looking for. There is lots of spreadsheets for me to look through and i'm sure they will help me get a grasp on future projections. I'll start there and let you know if I need any more help. ;)

Marky mark

Would you please share the link?

I need to start setting my goals too... but don't know where to start.

thanks
Mona
 
Hi Monalisa,

Here you go:

http://www.somersoft.com/forums/showthread.php?t=26452

I've had a look at the first couple of spreadsheets but there seems to be plenty more as you go through the thread.

Until about a year ago I'd never really set any goals in my life. I was told that if I wanted a goal I had to write it down and read it every day. It seemed a bit weird doing this but I did it anyway and within a month things that I'd written down started happening.

I got to the point recently where I'd actually done more in the last year than I ever thought possible and to be honest I started feeling a bit flat because I'd kind of run out of things to aim for. :(

Now I'm setting all new goals and I'll be doing 1 year, 5 year & 10 year goals. Wish me luck :D
 
Seriously I know that goal setting has me in the position I am in today. Hubby now no longer works but has fullfilled his dream of being an artist and we have the freedom of choice.

Recently I was sitting down with a friend celebrating being in BRW Fast 100 and selling one of her businesses to a large Aust Company and for me winning Australias Mortgage Broker of the Year and we were saying how could we coming from average families with no wealth behind us be where we are and others are not? We found we both had set goals up to 10 years ago that had lead us to the path we were on now.

Well to be honest it was not till the second bottle of champs that we made the decision to help others and make it as easy as possible - so we researched all the goal setting websites we could find and we found they charged a fee - so we approached the owner of the one we like the best and bought it and have made it completely free so others could benefit and we launched it last month and so far over 100 have signed up to www.gogoalsgo.com

The great thing about this site is that it helps you break big goals into little steps and sends you emails - even daily if you want to help you achieve that goal. Which to be honest can be a bit confonting when tucking into a Burger and the reminder comes up saying have you exercised for 40 mins today, how is the low carb eating going.

So if you want regular email reminders and help - please give it a go - it still has the 1980's Dallas look about it but I am getting someone to bring it into the 21st century - we are adding renovating and buying property wizards soon as well but you can add them manually yourself.

Hope you find it helpful
Jane
 
@Marky Mark

Thanks heaps for the link... I really need to get cracking on the goal setting - I want to just pick a numbr for passive income I want (to replace salary/wages) - but sometimes 'fear' creeps in and I wonder whether I am being realistic...I will start anyway - if its worked for yourself and so many people here, it has to work! I was aiming for 4 properties with my sister by Dec 2011 - but I am already visioning it happening early next year, so will definitely need to revisit goals soon enough :)...

Where are you at in your journey? I've just recently started having bought PPOR last November.

@ Buzz

Thats inspirational Jane - I just can't wait to be there already :) I will have a look at the website, thnx for sharing.

Regards
Mona
 
@Marky Mark

Thanks heaps for the link... I really need to get cracking on the goal setting - I want to just pick a numbr for passive income I want (to replace salary/wages) - but sometimes 'fear' creeps in and I wonder whether I am being realistic...I will start anyway - if its worked for yourself and so many people here, it has to work! I was aiming for 4 properties with my sister by Dec 2011 - but I am already visioning it happening early next year, so will definitely need to revisit goals soon enough :)...
*snip*

Great goals, but would you like to elaborate on this point? Is this that you have joint goals of having 4 IPs, or you're co-investing with your sister?

It sounds rosy to co-invest, but you can come across some serious issues that need to be well thought out.
  • One wants to, or has to, sell; the other doesn't
  • You will only get a portion of the income but be liable for all the debt (this can significantly reduce your purchasing power)
  • Life goals change, marriage, divorce, illness, etc
  • Disputes will arise - work out how to handle them BEFORE the arise so when the do, you already know the outcome
That's just a few - there's been heaps of discussion on this topic if you feel you should investigate further.
 
@ really need to get cracking on the goal setting - I want to just pick a numbr for passive income I want (to replace salary/wages) - but sometimes 'fear' creeps in and I wonder whether I am being realistic...I will start anyway - if its worked for yourself and so many people here, it has to work! I was aiming for 4 properties with my sister by Dec 2011 - but I am already visioning it happening early next year, so will definitely need to revisit goals soon enough :)...

Hey Monalisa .. just a thought .. try and look more at the "why". The "how" has a way of taking care of itself. If you want to achieve a goal for a specific purpose, you invariably find the ways to get there and it tends to happen sooner than you thought possible.
Also, having a "why" tends to not give rise to the fear factor so much, in my experience.
 
I agree with Rob - in my mind fear is the number one thing keeping people out of property investing. Actually I wrote a BLOG for API mag this week on that exact topic. Check it out - link thru my site sorry don't have other link on hand at the moment.

http://www.investorschoice.com.au/media.shtml

@markymark - all the jt investing issues others raise are true the other big deal is that once you have bought with someone else if you want to buy by yourself later then you are serviced with all the debt but only half the rent - just beaware of the risks and take steps to mitigate them - incidentially my #1 way rule of property investing - then again remember I was an explosives engineer for 15 years and if you dont minimise the risks in that job someone looses a hand - or worse.

Hope this helps

Jane
 
@Wobbycarly

We want to purchase properties in our own names - but haven't really thought of what we happen should our life directions change. By doing it together I mean we bounce ideas of each other and help each other out with finances should there be a need. e.g. i bought my PPOR last year, and we're living in it now, so I was making the repayments, while she need to save a few more $$ for hers - and its worked out perfectly to date - thank goodness we didn't end up getting another place around the area we live, because the idea is to invest and hers will turn into an investment property anyway.

@Rob

Thanks Rob for your input - the "why" bit is to escape the rat race.

I have actually used this budget spreadsheet from the link marky mark posted - which is giving me a better picture of our living expenses etc, and savings we will have once my sisters PPOR is rented out next year (hoping to buy in the next month or so) - and then we will look at pulling equity out of my home and her property to buy to more - well this is a vision we have and I am hopeful we will get there :)
 
I agree with Rob - in my mind fear is the number one thing keeping people out of property investing. Actually I wrote a BLOG for API mag this week on that exact topic. Check it out - link thru my site sorry don't have other link on hand at the moment.

http://www.investorschoice.com.au/media.shtml

@markymark - all the jt investing issues others raise are true the other big deal is that once you have bought with someone else if you want to buy by yourself later then you are serviced with all the debt but only half the rent - just beaware of the risks and take steps to mitigate them - incidentially my #1 way rule of property investing - then again remember I was an explosives engineer for 15 years and if you dont minimise the risks in that job someone looses a hand - or worse.

Hope this helps

Jane

@ Jane

thnx for sharing,... will give it a read.
 
@Wobbycarly

We want to purchase properties in our own names - but haven't really thought of what we happen should our life directions change. By doing it together I mean we bounce ideas of each other and help each other out with finances should there be a need. e.g. i bought my PPOR last year, and we're living in it now, so I was making the repayments, while she need to save a few more $$ for hers - and its worked out perfectly to date - thank goodness we didn't end up getting another place around the area we live, because the idea is to invest and hers will turn into an investment property anyway.

@Rob

Thanks Rob for your input - the "why" bit is to escape the rat race.

I have actually used this budget spreadsheet from the link marky mark posted - which is giving me a better picture of our living expenses etc, and savings we will have once my sisters PPOR is rented out next year (hoping to buy in the next month or so) - and then we will look at pulling equity out of my home and her property to buy to more - well this is a vision we have and I am hopeful we will get there :)

My point number 2 is probably the most significant. Getting the right legal/financial structure is critical if you want to continue to invest.
 
@Marky Mark

Where are you at in your journey? I've just recently started having bought PPOR last November.

Regards
Mona

Hi Monalisa,

I'm pretty much at the early part of my journey. It was probably this time last year when I sat down with pen and paper and wrote out a few goals. Some of them were as follows:

• increase income
• purchase first home
• purchase first investment property
• take overseas trip
• get married and start a family
• wash car every week
• spend quality time with family at least once a month

The above is just a few things from my goal list. I used to read it every day and at the beginning it felt weird as I had no money in the bank and wasn't really earning that much either.

The good news is that I have now done pretty much all of the above. Bought our first home in September and the investment in March. Got married and had two overseas trips. Significantly increased my income and spend time with my family at least once a month if not more. The hardest thing I've found is washing the bloody car :p

there is plenty of other things written down and I still read it every day. One thing I notice is that if I'm not on top of things then I don't read my goals and then the wheels start to fall off.

Hope this helps you get started.

@ Buzz. Thanks for the link to your goal site. It's great that you have offered this free of charge. I'm a strong believer in karma and I'm sure this will come back to you tenfold in the future.
 
Last edited:
Thanks for sharing marky mark :)...

I will definitely give it a go :).

Mona



Hi Monalisa,

I'm pretty much at the early part of my journey. It was probably this time last year when I sat down with pen and paper and wrote out a few goals. Some of them were as follows:

• increase income
• purchase first home
• purchase first investment property
• take overseas trip
• get married and start a family
• wash car every week
• spend quality time with family at least once a month

The above is just a few things from my goal list. I used to read it every day and at the beginning it felt weird as I had no money in the bank and wasn't really earning that much either.

The good news is that I have now done pretty much all of the above. Bought our first home in September and the investment in March. Got married and had two overseas trips. Significantly increased my income and spend time with my family at least once a month if not more. The hardest thing I've found is washing the bloody car :p

there is plenty of other things written down and I still read it every day. One thing I notice is that if I'm not on top of things then I don't read my goals and then the wheels start to fall off.

Hope this helps you get started.

@ Buzz. Thanks for the link to your goal site. It's great that you have offered this free of charge. I'm a strong believer in karma and I'm sure this will come back to you tenfold in the future.
 
Also, I note you have done LOTS in such a short time frame.... well done on that!!

Thanks Mona,

It freaks me out when I think about how much was possible. If I'd known about goal setting years ago who knows where I'd be now.

I think you'll find the important thing is to get started and read it every day. It works for everything:

My wife wanted to lose weight before our wedding day and had been trying for months without any success. I asked her to write out her ideal weight on a bit of paper and carry it with her all the time, and read it several times a day. She was dubious and kept putting it off as she thought I was nuts.

Anyway, she wrote on a price of paper " I am so happy now that I am 65 kilos and love how my wedding dress looks on my new body" etc...she had been trying for months to get to this weight with no change. Within 6 weeks of writing this out and reading it several times a day she had achieved her ideal weight. :cool:

Start with something small and just believe it and it will happen.
 
Top