Help establishing long term goals and strategy?

[jmillar]

Hi all,

I've never been one to set goals.. until last year when my employer/mentor encouraged it and this forum also showed the power of setting goals. I set a number of goals last year, all of which I achieved and I am now over the moon. I have set goals for this year and am confident I will achieve these as well

I have set my own short-medium term goals with regards to property investment (10 properties in 5 years) which is realistic and I will achieve... However, I'm a little embarrassed to admit I haven't established long-term goals..

I don't expect someone to make these goals for me as I know they are a personal thing, but a few small shoves in the right direction may be helpful..

If you were 21, what long-term goals would you set if you wanted to retire at say 50 years of age? I guess my options are something like:

- Buy 10 properties. Let each property roll over to P+I 5 years after purchase. In ~25 years I will have 10 properties mortgage free. Rent would be say $400/wk each so ~$200k pa.
- Buy 20 properties in total. In 20 years, sell off half and pay off debt for the remaining 10. Cash flow result same as above.
- Buy 20 properties. Retain all properties. Draw equity off 1-2 properties each year.
- Buy 20 properties. Retain all, and draw equity out and purchase commercial property for high net cash flow result.

Are these roughly the strategies generally taken? Are there other options I should consider when establishing my long term goals and then creating a strategy to achieve these?

Also, other than purchasing additional property, what can be done with equity? Can you use equity to buy cars, boats, holidays etc?

Any help would be much appreciated.

Thanks in advance.

 

[starter]

Shares, developments, fun. Equity could be used for all these things.

 

[Peter_Tersteeg]

It's interesting that a lot of people have a goal to have a number of properties. Would 20 properties that are cashflow positive be a suitable end goal? What if each of those properties was only cashflow positive by $20 per month?

How about 5 properties, each returning $1,000 per week after costs?

Perhaps a better way to approach the problem is to have a goal around what sort of income or lifestyle you'd like. From there you can start to determine how your investment portfolio needs to look and then you can work on how to actually achieve that portfolio.

 

[Deltaberry]

Set somee ambitious but achievable goals. Eg having 5 properties in 5 years. In time opportunities will open up and your goals will ebb and flow, eg in your 4th year you may want to convert all 4 properties to one better property/property of different risk profile.

 

[EN710]

I work out the general mission, then define the specif goals.

E.g.
Mission:
- stop relying on jobs to stay alive in 10 years
- and still have a good lifestyle

Stop relying on jobs to stay alive in 10 years

• Minimum income needed for 2 people: $30K after tax ~ $45K before tax
• Equity needed to achieve that assuming 5% yield: $900K
• Property needed: 3 properties fully paid @300K each, or 10 properties 60% LVR @$225000 each

And still have a good lifestyle

• Approx. income for 2 people for good lifestyle: $84K after tax ~ $115K before tax
• Equity needed to achieve that assuming 5% yield: $2.4M
• Property needed: 6 properties fully paid @300K each, or 20 properties 60% LVR @$300K each
• Assuming each property doubled every 10 years, 1st property is about $150K, 2nd property is about $180K, etc etc

etc.

Very simplistic, but give you and idea where to start.

 

[jmillar]

Shares, developments, fun. Equity could be used for all these things.

Thanks starter

It's interesting that a lot of people have a goal to have a number of properties. Would 20 properties that are cashflow positive be a suitable end goal? What if each of those properties was only cashflow positive by $20 per month?

How about 5 properties, each returning $1,000 per week after costs?

Perhaps a better way to approach the problem is to have a goal around what sort of income or lifestyle you'd like. From there you can start to determine how your investment portfolio needs to look and then you can work on how to actually achieve that portfolio.

Thanks Peter, you make a valid point certainly. I mainly wanted to get a grasp of what long term goals people set and how they go about it (ie buy and hold, buy and sell off half, etc)

Set somee ambitious but achievable goals. Eg having 5 properties in 5 years. In time opportunities will open up and your goals will ebb and flow, eg in your 4th year you may want to convert all 4 properties to one better property/property of different risk profile.

Thanks Delta. I've set a goal of 10 properties in 5 years (based on ~$200k PP) which I'm confident I will achieve if I stick to the plan and continue to work hard. I previously believed in setting short-medium term goals (3-5 years) and then reassessing as I go along, but I thought it would be smart to have a long term plan in mind as well, moving forward..

I work out the general mission, then define the specif goals.

E.g.
Mission:
- stop relying on jobs to stay alive in 10 years
- and still have a good lifestyle

Stop relying on jobs to stay alive in 10 years

• Minimum income needed for 2 people: $30K after tax ~ $45K before tax
• Equity needed to achieve that assuming 5% yield: $900K
• Property needed: 3 properties fully paid @300K each, or 10 properties 60% LVR @$225000 each

And still have a good lifestyle

• Approx. income for 2 people for good lifestyle: $84K after tax ~ $115K before tax
• Equity needed to achieve that assuming 5% yield: $2.4M
• Property needed: 6 properties fully paid @300K each, or 20 properties 60% LVR @$300K each
• Assuming each property doubled every 10 years, 1st property is about $150K, 2nd property is about $180K, etc etc

etc.

Very simplistic, but give you and idea where to start.

Thanks, that gives me a nice push in the right direction..


So it looks as though a common strategy is buy and hold x amount of properties until they are fully paid off. Luckily I am starting young so have time to do this. I assume the best way to do this would be to purchase IO but then let them roll over to P+I after 5 years and let them pay themselves off?

I have heard of people use the "buy 20, sell half off", strategy.. but I don't see the benefit in selling and throwing half the profit away in CGT, agent's fees, legal costs etc etc..

 

[Ace in the Hole]

I often see these long term property investment goals with conservative methods creating reasonable results aver the long term.
However, it's rare to see anybody putting much emphasis on their income goals, which I believe is of massive importance.
It can be done simultaneously to investing and it fast tracks wealth accumulation at a much higher rate, as extra serviceability creates a lot more opportunity.
So don't forget to work hard on your income goals (outside of working hours), just as you would with investing goals.