100K in passive income
Hi Melbinvestor,
You can also work your way backwards in terms of rental income, so since you need 100K in passive income in approximately 10+ years, you can work it out that you need 2K a week, or about 4-5 properties fully paid off (considering rental income will be higher in 10 years). So if you were to buy one property a year, worth, for example, 400K each, at 90% LVR, then you would end up with a portfolio worth around 8,505,159.32 after ten years, considering the growth on all properties will be at least 6% a year.
Your final result will be a "net profit" - leftover equity after paying off all of your loans ( iam not considering CGT for this example) will be 4,566,149.32, which will produce an income of more than 100K a year. Considering rental yields grow by at least 4% a year (just to match inflation- I am being super conservative; I am an ex-banker
), then you would only need approximately 4 properties paid off in full and 4,566,149.32 will give you more than 4 properties, so you will have your more than 100K passive income there. If we assume inflation rate to be at 4% per annum, then you really need 150K a year, if you are happy with 100K a year now.
Of course, not all properties will give you the same return, some will give you over 10% and some 4% , and it will change over time as well, but if you are serious about building a portfolio and having that control over your future through properties, then you need to think outside of Melbourne as well. Because if Melbourne goes down, you will be exposed to this high risk, therefore diversifying around Australia is vital.
