full time?

[schnugg]

just wondering how many of you have accummulated enough assets and are managing your investment (i.e. IPs etc) pretty much full time and not have to 'go to work' so to speak?

i am just starting out and have not yet purchased an IP (still paying off home). how many IPs do you need to start managing those as a full time job and have enough to live on?

very interested as to what you have to say.

thanks,
schnugg

 

[Sim]

Originally posted by schnugg
How many IPs do you need to start managing those as a full time job and have enough to live on?

This is kind of a "how long is a piece of string" question - it really "depends" !

The best thing for you to do is to work out how much it costs you to live with your current lifestyle. Your goal in moving to full time investing is to get your passive income from your investments to the point where it is covering all your living expenses, with enough left over to invest some more.

You should also work out how much money you will need to live on with the lifestyle you want to have in retirement - that should be your long term goal... to have a never ending passive income stream which will be enough to maintain your expected lifestyle until you die !

Now if you don't know how much money you spend on living at the moment - then I suggest that the very first steps you should take is to: 1) find out ! work out a way of tracking your living expenses - use something like Quicken... it's perfect for the job. 2) work out a budget - make sure you know how much money you will need to live on in the future so that you can work out how much you can save and how much you can invest.

As for how many houses you need to get this level of income... that really depends on the yields you get on your properties.

Have you read Jan Somers' books ? I suggest you do - "More Wealth from Residential Property" and "Building Wealth Story by Story" are must reads... they tell you pretty much all you need to know with some very good examples. You can find more information on them on the Somersoft website

 

[rickmick]

G'day Schnugg,

I'm sure there are plenty of people out there who will be able to answer your question better then me but I'll have a go.

Firstly, there is no simple answer.

Without going into too much depth it will basically be determined by cashflow.

You may have 100 properties, but if they are all heavily geared you may never be able to live of them because all the rental return goes into the costs of holding the properties, leaving you nothing in your pocket. If they all produced high rental yields and the gearing was low you would have the opposite type of situation.

Do a search to find previous posts on the high yield Vs capital growth arguments. There's always plenty of discussion on this and it is very interesting and educational.

Hope this helps in some way.

Regards

Rick

 

[schnugg]

thanks, sim. i have read Jan's book 'More Wealth...'. i guess i sort of knew the answer already but am not sure how to go about it.

say ideally i need $40K p.a. to live the life i want and i need 800K worth of incoming-producing assets @5% in today's money to achieve that. that's all fine but then my great talent in maths stops there!!! it all seems so overwhelming.

i guess i am looking to get help with tax and wealth creation strategy. i have a little money now to invest but am not sure how to structure the investment so that it's the most effective on the longer term. can you recommend someone? would an accountant with much property investment experience be the best person to ask?

thanks in advance for all your help.

 

[bundy1964]

2 properties and some shares is enough for my retirement, both my properties are commercial though so the return is between 8 to 10%. My magic number was 30k gone over that now.

The investment club way is to but 7 properties using nothing down deals then end up living off the capital gains.

A friend of mine buys using a cash deposit untill he reached the retirement figure. Now greed and fear of tax is keeping him buying and he still works

I tend to think 4 properties is all that is needed, either nothing down deals or minimum deposits. I would let the debt/capital ratio rise to at least 60/40. I would also invest an equal amount in shares, mostly in proven companies with a long term hold stratergy. Picking a figure of 80k in todays $ value that would be 4 200k properties geared 50/50 on average and 10 20k share investments in a mix of sectors not just the flavour of the month. That should give you a livable income alowing for market ups and downs, interest rate rises, maintainence and vacancies.

 

[simonjulie]

Hi Schnugg
I believe that achieving financial independence through property investment is an achievable goal however there are a number of key fundermental skills required for it to become a reality.
If you can pick up a copy of the April-May 2002 issue of API mag you can read how we did it.
Kind regards
Simon

 

[handyandy]

Don't forget to include some money per property for maintenance and improvements otherwise over time you will be living at the expense of the quality of your property.

As an example I have previuosly purchased a block of units that were built in the late 60's. The condition of these units was nothing but disgusting, in that no money had been spent on carpeting, kitchens etc since built with everything in original condition. (even the paint in quite a few)

So basically the owner took all rent with no reinvesting to maximise the return. Having looked at a number of blocks, in my time, this is not uncommon and have put it down to the owner being underfunded and as such no capacity (or want) to upgrade the properties as required.


Cheers

 

[schnugg]

thanks very much everyone for your input. it's very interesting. i actually re-read some of the chapters in jan's book and did some calculations. looks like i may be able to pay off home and buy my first IP real soon. and i am very excited!

great forum and thanks again for your help.

 

[paulzag]

Among potential retirees I know there is one other major factor besides cashflow. It's "the vision thing".

In practice it means that once they achieve the $ cashflow they are in a different place with different goals.

Some keep working because they need the PAYG income to support fresh borrowings. Others keep working because they want to buy 10 more properties.

The smartest ones keep working because they refuse to invest in a deal just because they can. As their wealth grew the market changed and now they are looking at what to do next.

Paul Zag
Dreamspinner

 

[Glenn]

Hi Schnugg,

These days, financial advisors are saying that to work out what you need to do to reach your financial goals, set a dollar amount/income level you want and a fixed point in the future for when you wish to achieve this. Then work out how much you would need to accumulated each year from now to then to achieve your goals.

Glenn

 

[beech]

hi Bundy1964,
Is it possible to expand a bit in detail please,re picking a figure of 80k out of 4 ip at 200k & 10 20k share inv,geared at 50%.
Was the 80k you spoke about the livable amount or was this before allexpences?

thanks Darren

 

[bundy1964]

Originally posted by beech
hi Bundy1964,
Is it possible to expand a bit in detail please,re picking a figure of 80k out of 4 ip at 200k & 10 20k share inv,geared at 50%.
Was the 80k you spoke about the livable amount or was this before allexpences?

thanks Darren

Hi Darren
The original ? I answered was the person wanting to get 40K return on an 800K investment. I did leave a 0 off on the 80 figure



at 5% return.....thats what I get for reading mail at 1am



so I should of said splitting your 800k between 4 properties geared at 50% average and 10 outright share investments should come close to the 5% net return. At todays market values!

Is that better?

 

[beech]

hi Bundy.what sort of net yields would u be looking at from the shares?
And would i be correct in saying u would need fair sort of yields on the properties after exp otherwise it doesnt seem like alot of net cashflow?

thanks Darren

 

[bundy1964]

Originally posted by beech
hi Bundy.what sort of net yields would u be looking at from the shares?
And would i be correct in saying u would need fair sort of yields on the properties after exp otherwise it doesnt seem like alot of net cashflow?

thanks Darren

Share yields are typicaly 4 to 6% fully franked ( tax has been paid from them at 30% company rate ).

I would think 6 to 7% yield would be enough after costs to get close to the cashflow from the ? I answered.......he was looking to make 40,000 a year on 800,000 invested.

Having commercial property will increase your cashflow if you buy in a high yield area. The cashflow isn't great but 800k is not a huge sum to play with in todays terms.