Good evening all, I've been a long time reader of this forum and gained so much information to date so thank you all. So now I thought I would throw out my 'master plan' to the forum to gauge your views and opinions on what I intend to do to get to my goals.
I'm currently 31 with a good income due to working FIFO which I have been doing for the past few years and also live relatively cheaply which has enabled me to get to where i'am today, I intend to continue doing this work for the coming years until I have acquired all the property required to hit my goals (current estimates are that i will have this at 35 ie 4 years time), I'm also single and have no PPOR currently live in house shares to save money.
My goals are ultimately by the time I'm 40 to have the option to stop working for an employer and retire comfortably I will more than likely work part time or freelance to keep myself busy but want the option to never have to work for someone again.
To hit this goal in today's money for the lifestyle I currently have I would need circa $50k after tax per year (circa low $70k pre tax) however this is based on my current single status, assuming in 9 years I can find a woman crazy enough to want to marry me and have kids then this income I estimate would need to be nearer the $125-$150k pre tax.
To achieve the above goals my 'master plan' is as follows: purchase circa 20 properties valued at the low to mid $200k range overall giving a total portfolio value of circa $5m, each property I purchase needs to be cash flow positive from day 1 so my current lifestyle and saving plan isn't jeopardised, each would be purchased with a 80% lvr when purchasing I would need to purchase at a good discount below the market value to cover me for any downturn and also give instant equity I can recycle for further purchases.
I have my first IP due to settle this month and I intend to purchase 1-2 more prior to Christmas the deposits and purchasing costs for the first 3 properties will be paid for from current savings. Next year I intend to purchase 4 more IPs half will be funded from cash savings from my job and the other two from equity in the first 3 IPs. 2015 I will aim to buy 5 IPs during this year again 2 funded from savings with the other 3 from equity, 2016 I should be able to repeat as per 2015 and in 2017 should be able to purchase the final 2 properties to hit the $5m mark. By the time I hit he 20th property/$5m mark I will then leave my FIFO work and seek a normal 9-5 role which I will continue for a further 5years while I let my portfolio grow with the intention of rent increasing on each property each year hopefully some capital growth too however i havent used CG in my workings so if i get some this will accelerate the plan. Any surplus rent or income will be left in an offset to reduce payments on debts.
Of the 20 or so properties I buy the intention is that circa 16 of these will just be simple low maintenance properties I,e units or houses on small blocks so easy to maintain and rent in high demand areas, the other 4 properties I would look for development potentials on bigger blocks so I can between the age of 35-40 sub divide, build units add granny flat etc. of these 4 once developed I would then either sell either part or all the development with the proceeds used to pay down debt on the overall portfolio with the intention of having between $2.5m-$3m of unencumbered property which with a 5-6% yield would give my target income by 40.
In my workings I have allowed to have circa $70-80k in cash savings per year from my job and also assumed that I can withdraw $32k from each IP as equity ($40k at 80%) and only using equity from each property once in the acquisition phase. The method relies on buying either cheap deals 10-20% discounted however if this doesnt occur then i will be slowed down butnwould hope there would be some form of CG if within 12-18months if i coldnt get a discount. I haven't forecast for any increases in expenses for a family or buying my own PPOR as I don't know if/when this will occur so have just left is on the back burner for now.
In my calculations I have assumed each property will be positive by $1k per year from day 1 and this would increase each year by circa $350 per property per year (may not go up each year but I would expect a $300 a week rent today to be circa $400 in 10 years time) I have based my calcs on 0%capital growth and just assumed $40k discount per property this is what I have got on my first IP so have Just forecast buying 20 of these although I realise some will be better and most will not be as good however should have some form of CG but as long as I can access $40k per property then it all works (hopefully), if I have to spend $5k or so in renos to do this then don't mind.
Based on my strategy I have above and goals can anyone give me some hints/tips/advice on if you think what I have above is achievable or too optimistic or if I've been too conservative. Also if there are any pitfalls to avoid if going down this route. Feel free to criticise or recommend changes as this would be extremely useful I have worked out the master plan based on the above in Excel and it works out in principal however lots of things work in Excel but it's just the transferring of this into the real world
.
Many thanks in advance, and apologies for all the detail above but feel its better to give too much information than not enough.
I'm currently 31 with a good income due to working FIFO which I have been doing for the past few years and also live relatively cheaply which has enabled me to get to where i'am today, I intend to continue doing this work for the coming years until I have acquired all the property required to hit my goals (current estimates are that i will have this at 35 ie 4 years time), I'm also single and have no PPOR currently live in house shares to save money.
My goals are ultimately by the time I'm 40 to have the option to stop working for an employer and retire comfortably I will more than likely work part time or freelance to keep myself busy but want the option to never have to work for someone again.
To hit this goal in today's money for the lifestyle I currently have I would need circa $50k after tax per year (circa low $70k pre tax) however this is based on my current single status, assuming in 9 years I can find a woman crazy enough to want to marry me and have kids then this income I estimate would need to be nearer the $125-$150k pre tax.
To achieve the above goals my 'master plan' is as follows: purchase circa 20 properties valued at the low to mid $200k range overall giving a total portfolio value of circa $5m, each property I purchase needs to be cash flow positive from day 1 so my current lifestyle and saving plan isn't jeopardised, each would be purchased with a 80% lvr when purchasing I would need to purchase at a good discount below the market value to cover me for any downturn and also give instant equity I can recycle for further purchases.
I have my first IP due to settle this month and I intend to purchase 1-2 more prior to Christmas the deposits and purchasing costs for the first 3 properties will be paid for from current savings. Next year I intend to purchase 4 more IPs half will be funded from cash savings from my job and the other two from equity in the first 3 IPs. 2015 I will aim to buy 5 IPs during this year again 2 funded from savings with the other 3 from equity, 2016 I should be able to repeat as per 2015 and in 2017 should be able to purchase the final 2 properties to hit the $5m mark. By the time I hit he 20th property/$5m mark I will then leave my FIFO work and seek a normal 9-5 role which I will continue for a further 5years while I let my portfolio grow with the intention of rent increasing on each property each year hopefully some capital growth too however i havent used CG in my workings so if i get some this will accelerate the plan. Any surplus rent or income will be left in an offset to reduce payments on debts.
Of the 20 or so properties I buy the intention is that circa 16 of these will just be simple low maintenance properties I,e units or houses on small blocks so easy to maintain and rent in high demand areas, the other 4 properties I would look for development potentials on bigger blocks so I can between the age of 35-40 sub divide, build units add granny flat etc. of these 4 once developed I would then either sell either part or all the development with the proceeds used to pay down debt on the overall portfolio with the intention of having between $2.5m-$3m of unencumbered property which with a 5-6% yield would give my target income by 40.
In my workings I have allowed to have circa $70-80k in cash savings per year from my job and also assumed that I can withdraw $32k from each IP as equity ($40k at 80%) and only using equity from each property once in the acquisition phase. The method relies on buying either cheap deals 10-20% discounted however if this doesnt occur then i will be slowed down butnwould hope there would be some form of CG if within 12-18months if i coldnt get a discount. I haven't forecast for any increases in expenses for a family or buying my own PPOR as I don't know if/when this will occur so have just left is on the back burner for now.
In my calculations I have assumed each property will be positive by $1k per year from day 1 and this would increase each year by circa $350 per property per year (may not go up each year but I would expect a $300 a week rent today to be circa $400 in 10 years time) I have based my calcs on 0%capital growth and just assumed $40k discount per property this is what I have got on my first IP so have Just forecast buying 20 of these although I realise some will be better and most will not be as good however should have some form of CG but as long as I can access $40k per property then it all works (hopefully), if I have to spend $5k or so in renos to do this then don't mind.
Based on my strategy I have above and goals can anyone give me some hints/tips/advice on if you think what I have above is achievable or too optimistic or if I've been too conservative. Also if there are any pitfalls to avoid if going down this route. Feel free to criticise or recommend changes as this would be extremely useful I have worked out the master plan based on the above in Excel and it works out in principal however lots of things work in Excel but it's just the transferring of this into the real world
.Many thanks in advance, and apologies for all the detail above but feel its better to give too much information than not enough.
