Can or Will you retire on property alone?

Realistically how many residential properties will you need to retire ??

The average gross yield for properties in Australia is around 4%, but let’s be generous and say you earn a 4.5% yield across your property portfolio.

This means if you eventually own $1 million worth of properties with no debt, you’ll get $45,000 rent.

But you’ll still have to pay rates and taxes and agents commissions and repairs; leaving you with something like $35,000 a year.

And then you’ll have to pay tax on this income.

When you do the sums you’ll see that you need an unencumbered portfolio worth at least $4million to earn that $100,000 a year after tax. Not everyone needs $100,000 pa and I get this. But I need more

Remember that’s $4 million worth of property and no mortgage debt, otherwise your cash flow will be lower.

And of course you’ll also need to own your own home with no debt against it.

Here is an overview from January 2016, highest gross rental yields in Australia.

I expect these yields may be slightly lower today?

Clearly Tassie in the main the winner.

Highest rental yields Australia-wide (houses)
Highest gross rentals within 10km of a capital city – suburb, state, median value and gross rental yield:

1. Goodwood, TAS, $212,138, 7.7%
2. Risdon Vale, TAS, $176,341, 7.7%
3. Clarendon Vale, TAS, $155,434, 7.6%
4. Rokeby, TAS, $194,901, 7.1%
5. Derwent Park, TAS – $237,644 – 6.7%
6. Glenorchy, TAS, $248,288, 6.6%
7. Warrane, TAS – $237,047 – 6.6%
8. Mornington, TAS – $274,552 – 6.2%
9. Lutana, TAS – $273,363 – 6.0%
10. Rosetta, TAS – $320,649 – 6.0%

Highest rental yields Australia-wide (units)
Highest gross rentals within 10km of a capital city – suburb, state, median value and gross rental yield:

1. Carlton, VIC, $364,925, 7.2%
2. Brahma Lodge, SA, $247,234, 7.1%
3. Rokeby, TAS, $208,550, 7.1%
4. Montrose, TAS, $208,561, 7.0%
5. Glenorchy, TAS, $198,110, 6.5%
6. Oxley, QLD, $349,992, 6.5%
7. Salisbury, QLD, $372,808, 6.4%
8. Rosetta, TAS, $227,717, 6.4%
9. Malak, NT, $337,130, 6.4%
10. Brisbane City, QLD, $495,771, 6.3%


Now the game is changing which is going to make investing in resi property a tad harder, as lending tightens and interest rates increase. We may also see some markets approaching peak, and there are no guarantees that we will see double digit growth in 2017?

Its not all bad of course, but whether the buy and hold forever is going to work moving forward may need to be re tweaked??

MTR

 

So how long has it taken to achieve this? Just curious on time frame?

 

You don't need $1m + a ppor to live comfortably in retirement

So says the barefoot investor.

 

You've outsourced the drug courier business?

 

OK, I wont ask any more questions

 

Same here!

I guess some of the high income earners would say that this is us also, but we have enough for our wants.

Again, same here.

We also still carry a large debt, but with a large amount sitting in offsets. Hubby has itchy feet & wants to buy more, but I'm content, although want to buy more a few years after the market turns here in Sydney.

LOL! Same again.

@MTR, our yield across our portfolio is higher than 4.5%, but we have three NRAS, a block of units & a dual occ in the mix. We have a mix of Regional & City IP's and we are also going to put a GF onto one of the properties.

 

Depends where you buy. There are properties in Adelaide with over 10% gross yield. However, they are higher risk, low cashflow properties and I am not sure about net yield. That said I think you might be able to get you $100k net from $2 million unencumbered property?

I am trying the buy, renovate, build sell some, keep some strategy. When I sell I use the funds to pay down debt and surplus funds in offset accounts as a buffer. Even so, I don't plan to retire on rent. The numbers don't stack up for me.

 

If your focus was purely yield, there's many types of properties that get 10%+ net yields (sometimes on long WALEs too, even in Aust), if you spent your time looking. May require some effort such as building/renovating. But basically you should be done at around $1.2m.

Next question someone will probably ask me (so I'll preempt it) is if that's the case why are all these people buying at 2-3% yields in metro Syd/Melb. I don't know. Because it goes up? Sounds like a classic bubble haha.

 

It's quite sad that $100K a year in Sydney barely scrapes the surface in terms of living expenses. First world problems.

 

I don't see massive shanty towns in Sydney filled with pensioners, the unemployed or unwashed masses.

$100k far exceeds 2 incomes working at Woollies.

 

100k a year is fine in Sydney assuming it is split between two people, you have a paid off PPOR and no kiddie expenses anymore.

 

Wow that's a lot of ifs. The times we live in.

 

Not true. You don't need anywhere near that amount. Why only focus on the yield, and not the asset value of the property as well. Do you intend to take all the properties with you to your grave?
If not, then why not sell down a property every 5yrs or so and live off the rental of other plus the asset sale.
5 × $400k properties = $2million + ppor. Sell one $400k property. Even over 5yrs thats $80k + rental income of others. So maybe $120k / yr over 5yrs. With 5, you can easily live comfortable for the next 25yrs on $100k/ yr in todays dollars. Who cares after that. If you retire at 50, that comfortably takes you to 75. At 75 downsize ppor and live comfortable to 85.

 

It's a good point and I look at it like that too. If you can build up a solid passive income by 40ish try and get by on the rental income until you hit 50 or so, sell some, by 60 your super kicks in, make do with that for a while then sell a little more...

If you can achieve a paid off PPOR and around 2 million in assets (net ex super) by around 40 you will never chew through it if you limit yourself to around 100k a year. Assuming your yield and growth is around 5%

 

Exactly. I have kids, and soon a large mortgage

On the flipside, if I could sell the kids (and maybe the wife), I could retire right now lol!

 

MTR...for most people having $4m net will mean they will probably need about $7-8m gross. 100k on $4m is about right...I am heading towards 150-180k...with a portfolio well into 8 figures....it is hard gig to just rely on rents as there are unforeseen expenses.

The preference is to have other asset classes returning at least 4%.

Despite people saying so...most on here will not get close to the 80-100k needed....just a unfortunate fact.

As a matter of fact most upper middle class couples retire on 40-60k net..after super, govt pension (if any any). The exceptions to this rule are people who are on defined benefit pensions and those who sold their houses and get extra income from the extra funds.

A lot of defined benefit payouts are between 40-60k anyway....it is those who were at the top of their game who get the large pensions or politicians.

 

I'd rather try every which way accessing the equity than selling to get my hands on it.