Hi all,
It is common knowledge that those that succeed have not only a goal but also a plan of getting there. I'm keen to know how others have contructed a plan.
How much to retire on?
My personal preference here is $75k gross for my wife and I. But I still have to take out property managers fee. In Perth (we're more expensive) 9.35% for Management fee, Letting Fee 1week rent plus 2 x GST, plus inspections -say $200 per property p.a., plus some other minors.
We now have $75k less say $10k property fee. The only deductions I would count on are those for PM expenses as in 30 years time there won't be too much depreciation left to claim.
Better make it $85k.
How much IP value do I need to own outright?
To generate $85k at a 5% yield would be $1.7mill.
To own $1.7mill outright how much property ($) do I have to own before I start to sell IP's to clear out the debt so I am left with the $1.7mill?
Hmmm - if I'm purchasing on the way at 105% finance and I've got stamp duties to pay, previously deducted depreciation to add on and tax to pay - well maybe 2.3 times the outright amount. (I calculated this a year ago how and on what I can't recall. So please challenge it with your own ratio).
Answer $3.91 mill.
Now I know where I am now but what type of capital growth do I need to get there?
All I know is this:
To earn 2.33 the amount on an investment:
1 year left to retire Capital Growth required 133%
2 52.75%
3 32.64%
4 23.59%
5 18.47%
6 15.17%
7 12.87%
8 11.17%
9 9.87%
10 8.84%
11 8.01%
12 7.32%
13 6.73%
14 6.24%
15 5.81%
and this is net of inflation.
Am I on the right path?
I buy a two properties for $100k with 15 years to retire. Earning 5.81% they are finally worth $233k each.
House A Loan 105k Value 233k
House B Loan 105k Value 233k
I sell House B paying out House A and B's loan amount that will leave me with $23k to pay tax and the like.
For each house I bought in the proceeding years I needed to earn a higher yield.
If I had $1.7mill of properties today and they earned 5.81% then I could retire on a Gross Income of $85k.
As I don't have $1.7mill (I have $400k) then I better get crackin' buying some more!
There are probably many inaccuracies in the above and false assumptions.
That is why I throw the above open for discussion.
If you a serious about retiring on an IP income how do you plan to get there?
For those that say you can't guess a growth yield - you're right. But without using indicatives you have no plan.
Regards
Keen
It is common knowledge that those that succeed have not only a goal but also a plan of getting there. I'm keen to know how others have contructed a plan.
How much to retire on?
My personal preference here is $75k gross for my wife and I. But I still have to take out property managers fee. In Perth (we're more expensive) 9.35% for Management fee, Letting Fee 1week rent plus 2 x GST, plus inspections -say $200 per property p.a., plus some other minors.
We now have $75k less say $10k property fee. The only deductions I would count on are those for PM expenses as in 30 years time there won't be too much depreciation left to claim.
Better make it $85k.
How much IP value do I need to own outright?
To generate $85k at a 5% yield would be $1.7mill.
To own $1.7mill outright how much property ($) do I have to own before I start to sell IP's to clear out the debt so I am left with the $1.7mill?
Hmmm - if I'm purchasing on the way at 105% finance and I've got stamp duties to pay, previously deducted depreciation to add on and tax to pay - well maybe 2.3 times the outright amount. (I calculated this a year ago how and on what I can't recall. So please challenge it with your own ratio).
Answer $3.91 mill.
Now I know where I am now but what type of capital growth do I need to get there?
All I know is this:
To earn 2.33 the amount on an investment:
1 year left to retire Capital Growth required 133%
2 52.75%
3 32.64%
4 23.59%
5 18.47%
6 15.17%
7 12.87%
8 11.17%
9 9.87%
10 8.84%
11 8.01%
12 7.32%
13 6.73%
14 6.24%
15 5.81%
and this is net of inflation.
Am I on the right path?
I buy a two properties for $100k with 15 years to retire. Earning 5.81% they are finally worth $233k each.
House A Loan 105k Value 233k
House B Loan 105k Value 233k
I sell House B paying out House A and B's loan amount that will leave me with $23k to pay tax and the like.
For each house I bought in the proceeding years I needed to earn a higher yield.
If I had $1.7mill of properties today and they earned 5.81% then I could retire on a Gross Income of $85k.
As I don't have $1.7mill (I have $400k) then I better get crackin' buying some more!
There are probably many inaccuracies in the above and false assumptions.
That is why I throw the above open for discussion.
If you a serious about retiring on an IP income how do you plan to get there?
For those that say you can't guess a growth yield - you're right. But without using indicatives you have no plan.
Regards
Keen