What does it really take to earn $100k PA Passive Income

[Burramys]

These are dividends and prices of two blue chip shares, reduced to even numbers, which throws out the DY. Just look at the columns.

Company one
2006 .. Div 100 cps, price in January $10.00
2007 .. Div 120
2008 .. Div 125
2009 .. Div 156 cps, price in January $15.50
2010 .. Div 195
2011 .. Div 214

Company two
2006 .. Div 100 cps, price in January $10.00
2007 .. Div 109
2008 .. Div 116
2009 .. Div 87 cps, price in January $6.34
2010 .. Div 91
2011 .. Div 97

I've still got both and am very happy with them.

Having adequate cash reserves and income above needs allows for a fall in income, perhaps for a protracted period.like GFC #2. I have more than adequate cash for this and to buy any tasty morsels that others discard. Worst case scenario is a 50% drop in income, and I would last for about ten years without having to sell anything.

 

[redwing]

I am using this strategy, slow and steady wins the race. Also I would like to sleep at night and have an enjoyable lifestyle both now and in the future.

It's all like slow and steady and then one day...whoosh

 

[Jaggannath]

Sounds like my folks. You need a bloody lot of coin when you live to your 90's and your self funded.
Defined benefit government super was great but no wonder they got rid of it. The old man must have pulled 2m+ from us tax payers from a system setup for peolple who retired then died

Don't worry, looks like the government is stripping money off those people now (except for themselves of course!)

 

[dajackal]

Check out the following Youtube link on the "Yield Trap" by Peter Thornhill (author of Motivated Money).

Thanks austini. Very insightful video. Basically I should stop worrying about yield and continue to accumulate LICs and index ETFs. Dividends will continue to grow over time along with the share price. Even during a market crash the dividends may dip a little, or maintained in the case of LICs, but no where to the same extent as the share price.

I've been using DCA, DRP, SPP strategies to accumulate and will continue to build up my courage to purchase even more during market dips.

One day I look forward to being able to sell down part of my property portfolio and convert the equity to dividend paying shares.

 

[Big Will]

It's all like slow and steady and then one day...whoosh

It sure is, slow to start but give it a couple of years and bam

 

[Deltaberry]

A lot of the posts are about how to generate say 5% return when you have $2m or $3m.

The question though is, how do you get $2m or $3m?

Which leads to the next question, if you can do it in a short or reasonable amount of time, aren't you much more capable than 5% return?

 

[Rixter]

A lot of the posts are about how to generate say 5% return when you have $2m or $3m.

The question though is, how do you get $2m or $3m?

Which leads to the next question, if you can do it in a short or reasonable amount of time, aren't you much more capable than 5% return?

When you hear ppl say 5% they are referring to average yield component. In reality there is CG + Yield that provides around average 14% p/a total return over the long term on good quality well located property.

Its the leveraged CG that allows one to get to the $2m, $3m or more.

 

[pinkboy]

A lot of the posts are about how to generate say 5% return when you have $2m or $3m.

The question though is, how do you get $2m or $3m?

Which leads to the next question, if you can do it in a short or reasonable amount of time, aren't you much more capable than 5% return?

Im getting there slowly, saving on costs like doing my own depreciation schedules.


pinkboy

 

[Television]

Im getting there slowly, saving on costs like doing my own depreciation schedules.


pinkboy

Certify your own places as well mate, save you a bomb.

 

[Ace in the Hole]

A lot of the posts are about how to generate say 5% return when you have $2m or $3m.

The question though is, how do you get $2m or $3m?

Which leads to the next question, if you can do it in a short or reasonable amount of time, aren't you much more capable than 5% return?

Personally, I am capable of making good money actively, but never really looked into how to make great returns passively.
Probably because when you're actively making good money, you don't really need to have optimal returns to grow capital base fast, but rather have capital to play with.
So my journey to this stage has been completely as an assets accumulation/capital growth investor.

Horses for courses, I'll continue to play it this way until deciding to transition to a more returns based investor style.

 

[austini]

Basically I should stop worrying about yield and continue to accumulate LICs and index ETFs. Dividends will continue to grow over time along with the share price. Even during a market crash the dividends may dip a little, or maintained in the case of LICs, but no where to the same extent as the share price. ...

Yep, that's pretty much it. Essentially a growing income stream that over the long term will keep well ahead of the rate of inflation. Property can do the same albeit it's not as passive and it is a lumpy investment. That is, a large single transaction. So for most people DCA and the like is not an option. Also with property it is more difficult to manage tax planning when you sell. That is, you can sell and transfer (eg to SMSF) shares in whatever amount you choose, not so with property.

But despite my enthusiasm for shares nowadays there is no doubt that with property, leverage (banks love it) and forced savings (one will generally do whatever to avoid losing the property) are very positive attributes with property investment. I don't think we would have ever saved as well if it wasn't for the fact that we would do whatever to meet debt repayment etc.

Also note that the ease with which shares can be bought and sold can be both an advantage and a disadvantage depending on the mentality of the investor. As Thornhill would say, generally when you get the urge to sell and/or fiddle with the portfolio take an asprin and go and lie down for a couple of hours until the urge passes. (I wonder if China is reading this)

Gordon

 

[china]

Also note that the ease with which shares can be bought and sold can be both an advantage and a disadvantage depending on the mentality of the investor. As Thornhill would say, generally when you get the urge to sell and/or fiddle with the portfolio take an asprin and go and lie down for a couple of hours until the urge passes. (I wonder if China is reading this)

Gordon

Guilty as charged. The fiddling is more exciting than the aspirin unfortunately!

 

[Joeyv]

I really don't think you need a equity of 3.5mil to get 100k a year rental return.

Just look for cheap property's (150-200k) that yield 7.5% = 12k-15k rent per year

You need about 10 of these all paid off, which is the boring part

Which will give you 120k-150k per year rent

By the time you take out maintenance, insurance, management etc. it should leave you with 100k per year.

The more you pay off the quicker you get there.

 

[Rixter]

I really don't think you need a equity of 3.5mil to get 100k a year rental return.

Just look for cheap property's (150-200k) that yield 7.5% = 12k-15k rent per year

You need about 10 of these all paid off, which is the boring part

Which will give you 120k-150k per year rent

By the time you take out maintenance, insurance, management etc. it should leave you with 100k per year.

The more you pay off the quicker you get there.

So you need 20 , sell 10 & pay out loans on the other 10?

 

[Joeyv]

Depends on your wage and how much you can pay off the mortgages to pay off sooner.

If they are positively cashflow not as long.

Also assumes IR stay low for a long time.

 

[Rixter]

Depends on your wage and how much you can pay off the mortgages to pay off sooner.

If they are positively cashflow not as long.

Also assumes IR stay low for a long time.

Sounds like a very slow strategy.

 

[Joeyv]

It could only take 20-30 years.

Maybe less depending on how much extra you pay down.

This is not taking into account CG either.

Isn't real estate meant to be a long and relatively safe investment?

 

[D.T.]

Aint nobody got time for that

 

[HomePage]

Just look for cheap property's (150-200k) that yield 7.5% = 12k-15k rent per year

With greater yield comes greater tenant management issues. A passive income experience it would not likely be.

 

[Joeyv]

Also true that why I made it 10 properties.

It is still a way to get there