Anyone retired early solely from property or shares?

I see loads of people in their 60s, 70s+ in this position. They dont sell shares as they pay massive returns.eg CBA shares that cost $5.40 in 1991 now pay a div of $4.31 per year fully franked. Thats a return of 79.8% pa before franking credits which cvan even be refundable to gross up further. If the CBA shares drop in value from $80 to $70 they dont care because they arent going to sell them. They cant replace the income if they do. And dont want to pay tax on the capital gain. They plan to die with the shares to pass on the tax liability.

Someone who put $20K into CBA in 1991 would have shares worth $272K and have a return of 1260% in the space of 28 years. And has earned around $63 per share in come. If they went DRP with the shares their portfolio may now be worth $400K. If they took up each float offer with a equivalent new amount and DRPs they may have a holding worth $600K. One of the gems of CBA shares (and many other companies) is noted when you look at how the dividend has progressively increased over time. People look at yield and think of what you pay today. Look at it as a someone who invested at $5.40 and its like a term deposit that pays more and more the longer you hold it.

Some of these people also had the old govt pensions - Its for life. They die and it goes to the spouse. Some have two pensions or three for a couple. They get a pension of $100K a year each and then earn income from a portfolio that is worth $700K that produces $40K of bonus income

Modern super can also be like this - but preserved.

 

Made my day reading about the 1260% my grade 10 maths skills had it worked out lower then that but I started with CBA MID 90'S $10--45--and was in the DRP up too one year ago the resigned up a week ago,and in the same rusty boat and never intend to sell because money never sleeps..

 

Would you say your property portfolio is a passive investment?

 

To be honest , not a lot .

We've had high expenses with kids going through private schools and one year their combined fees were higher than my PAYG .... Most of our family holidays were camping holidays and the one big OS family holiday was funded by profits from a property sale as were our living funds for the year I mentioned above.

There are many people on this forum who would have higher disposable income than we've had , even though our PAYG might have been higher .

If I was happy to live outside of Sydney , put our kids through state schools , relax and do nothing , we could have retired after our first property cycle around ten years ago .



Cliff

 

Not at all.

 

Many of the "rich" investors I know have made the decision to scale back on the job, rather than working their butts off for 10-15 years longer to pay down debt and retire.

I left corporate when my kids were little, so in that time my income has been much lower than it could've been. Sure, I may have had 5 fully paid off investments now, generating 100k income per year, but what on earth would I do with my time? My kids are still in primary school so I cant just jet off whenever I want or live an impulsive life.
Being able to make the choice to scale back on work and do something else while the kids are at school is due to property investing. I know this is the type of answer you don't want to hear but I'd say many people on this forum are living life similar to me.

I'm currently sitting in a coffee shop at a park as i do every school morning after drop off. I wouldn't trade this for a few years more in the city working stupid hours and paying a nanny to raise my kids, just so I have a fat bank account by my late 40s.

 

The Bank makes over $1m profit an hour. We have a joke at CBA that more profit is earned when the staff are not at work (i.e. at weekends). The interest calcs just silently tick over in the background...

 

Is that $100K gross or net of expenses/tax? Also how did you pay them off - did it involve selling down?

 

how you did it?
This is not my example but of personal friends I know:

• what and where you bought
• Bought in QLD unit as PPOR, couple female 12 years younger than male. Moved to Sydney sold QLD PPOR, bought in PPOR unit for cash. Then attended property workshop, bought 2 IPs units OTP. Went to Qatar for next 16 years to work on contracts and bought, 1 IP unit in SYD and two more IPs in QLD house and unit. Sold QLD house, came and settled back in QLD, bought commercial property and moved into IP unit as PPOR. Should mention all these properties are paid off, very little tax in Qatar if you were declared as a foreigner....

• how long it took
• Let's see overall 2 cycles in SYD so around 20-22 years

• when/age you retired
• retired ages were a year ago 45 and 57

• how much passive income you're living off
• well let's say around $20K/month, doesn't mean they need to spend that

• did you do it with/without kids etc.
• No kids!

 

I've been in Qatar for 3 years and hit aserviceability ceiling due to banks shading our salary by 30%, then applying marginal tax bracket prior to assessment. On top of this, our flight, accommodation and transport allowances are not taken into account as income, despite our ability to live off our allowances and save 100% of our salaries.
I'm sure your friends had a blast living the expat life while setting themselves up nicely for their retirement! Kudos to them for surviving 16 years in Doha - must be very relaxed and patient people!

 

Our story is much more complicated and too much to write, and I feel partly retired for the last 20 years or so, BUT we stay in business not as to make ends meet, rather as the opportunities it provides and we love what we do, plus we feel we have obligations to our people we employ, well many reasons....so why quit?
There's a big difference being self-employed and being in business, if you manage people and have controlled processes in place and can leave your business away for some time (say to travel) then that's a business, but if you are self-employed and need to turn up next day to do the work, then you really still have a job. In true business you leverage not just profit but time of other people too, each person has only 24 hours, many people have more, if you understand what I mean.
Hence why many don't understand mega wealthy as they love what they do so why should they stop and do what? They don' t just do it for the money, but challenge, legacy, gratuity so they can give more....many reasons that are only personal to them!
So yes we have 8 digit portfolio just from the IPs, generating more than $100K net, at say 25% LVR, which really took around 19 years (we started Ips in year 2000) and we are still in accumulation stages, as why pay off all and pay more tax on income?
The wonderful thing about investing is that it creates passive income, alternative income as opposed to earned income from a job or business.
Also, earned income is always taxed, CG income is not until you sell.
Just imagine, you received rent money, dividend money, business profit or set salary money, interest money, royalties from private IPO's or some other source from advertisers or blogs you write or talks you host or JV you hold....many sources of income, which then again some money you can reinvest OR into art, gold, jewellery, other... what your heart desires - then you truly feel financially ahead, wouldn't you agree?
Luckily I heard many years back that to be truly financially wealthy one should strive to have at least 3 sources of income or more, so if one dries up you still move ahead with other sources of income you receive.
I wonder why isn't this taught at school, our aim as investors would be to generate alternative sources of passive income...wouldn't you agree?

 

Totally agree!
We were on median salaries, but self-employed, and managed to build a substantial IP portfolio and else. We practiced delayed gratification, invested into IPs and lived in below average PPOR at first, for at least 10 years, prior to having children, and diversified into business from a salary jobs instead. Only later did we upgrade to premium suburb, private schools, etc....
It was really compound growth effect, if you can comprehend. I use the example from Barefoot Investor book:
Assume a 15 year old can say invest a total of $50,000 ($5,000 each year for the next 10 years, then stop but keep the investment for the next 45 years - so until 60 years of age).
Another 25 year old can say invest a total of $180,000 (will just start 10 years later, $5,000 for the next 35 years - so till 60 year of age).
Who do you think will be ahead at 60 years of age?
Yes, the 15 year old who started earlier and invested much less, rather than the 25 year old who started later and invested so much more.
15 year old balance at 60 is $2,709,677 (about $2.7 million) as opposed to 25 year old balance of $1,645,197 ($1.6 million).
That's the power of compound growth, the power of time!!!!
Now I realize this is very generalized example BUT just to illustrate a point.
And realize there is a difference between compound interest and compound growth, interest is passive income earned which each year will be taxed, whereas capital growth in value of property/land/tax/business, etc... is not taxed until it is sold.

In addition, it is not how much one earns but how much one saves and what one does with it, how early, and what returns from investments one generates.

Not here to boast, perhaps we have been lucky, we had been fortunate enough that we took direct control of our fiances too, so some share investments provided 20 times return, hence then reinvested into direct property with cash and leverage and other.
Sometimes, it is possible to actually make huge returns.
I always say to our adult kids now, I wish I had the income of some of my well earning friends, them my net worth would have been 10X more at least of what I have (no regrets - I feel very humbled and fortunate indeed and my life is great!).

OK, I think I gave my heart and soul, but most really heard about compound growth but really don't live it and comprehend!

 

Agree, I could not do it as we have kids, and personally I would choose to live on bread and butter with my family here rather than there, it is a long chunk of one's life
Perhaps being a pilot and interior designer helped, as they traveled a lot for work and when they lived there too.

 

I’m interested to know what exactly was your strategy in share trading? I am 26 with close to your starting balance at 29 but my strategy is not very aggressive. I have an IP and another coming this year and the rest is in VAS and bonds I worked very hard to get here and don’t want to loose any!

Great threat OP ✌

 

Having been involved in a successful partnership for over 35 years, the income derived from this has allowed me to invest across asset classes.
1. Super : @ 900k
2. 3 IP's ( 2 owned outright, with the 3rd being owned outright by August this year)
3. Invested 100k into 3 LIC's (300k) and add 7k quarterly to each.
4. My share of the partnership to sell ( happening in August)
This will give me circa 80K Nett p.a.
3 grown up children now and grandkids. Wife deceased.
Certainly not retiring early. I will be 60 early next year. But more than happy with what my efforts have produced.
Can't wait to fully retire and own my own time!

 

@TAJ, your post really touched my heart. I can’t imagine the highs and lows you’ve experienced. Very inspirational. Here’s to a well deserved and wonderful retirement.

 

Thanks for the kind words.
Will be pulling up stumps mid August this year, so a little over 4 months to go. Actually haven't been this excited for a very long time. I have enjoyed getting my final plan together.
Selling my share of the partnership in August so that those funds fall into the next financial year. Will be purchasing a new vehicle ( Single cab 70 series Landcruiser with kitchen and sleeping area as the tray) toward the end of this year in readiness for some off road domestic travel next year. Will keep my villa at Yamba as a base.
Begin pension draw down from super in February 2020. Life is looking pretty darn good at the moment; just wish my wife was still around to enjoy it all with me.
Fishing, diving and surfing, here I come!

 

Taj, I am sure you have had many highs and lows in that 35 years and clearly you have been planning for a long time. I wish you well in your retirement

 

You should run your scenario via ANZ - their foreign policy is not one of the best. They will shade the income to 80%, accept Qatar currency and will allow allowances as part of servicing.

 

Why not immediately upon retirement in 4 months time?