Can or Will you retire on property alone?

I said the same at age 39. Nek minute. . . .

 

One difference between shares and property is that your headline yield for property has to also include costs (some larger too, such as the cost for removing a tree as it's roots were in the drainage), shares' headline yield is pretty much it (apart from tax, which could be payable with property if the yield is decent enough). Will agree that yielding properties certainly add to the equation.

Great stuff that you're being able to place yourself and family so that your daughters can benefit from your foresight. Hopefully they will understand how to manage the IPs as well so the equity isn't eroded soon after being passed to them. When considering what I pass on, I'm going to look into management of the investments so my dependents can manage the investments to benefit from them.

In answer to OP question, I'm not retiring on IPs alone but it is inspirational (and sometimes tiring!) to read what others are doing to place themselves so they can retire on passive investments.

 

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That's what I mean, devil's in the detail - if you didn't have a work car like the rest of us, you could add up to $5K a year quite easily on top. $50 a week on fuel, $1500 for rego and insurance, $1,000 set aside for repairs, etc.

Anyway we're getting off topic in terms of the purpose of the thread..

 

I gave up my permanent job last year and have enough passive income to live comfortably (would be a different matter all together if we had kids and an expensive wants list). Ppor is paid off. So far this year we've had a few weeks holiday travelling across aus, now in NZ. The things I get the most pleasure from doing cost very little. Went for a day walk in Mount Cook NP yesterday, beautiful day and great exercise (took packed lunch, just cost for fuel). Went kayaking this morning (gorgeous day again) and a mountain walk in the afternoon after bbq lunch (just cost of a bit of fuel to get to the lake). Have 3 holidays booked for later in the year, ski passes at local ski field cost $100 each for the season. These things can cost very little.

Most of our properties are getting paid down on p&I. I estimated that around 50yrs I'll start selling 1 ip every couple of years to bump cash flow from rentals up to a very comfortable level. Hubby's super will kick in in a few years, then mine. I reckon we have enough 30 odd years but will still keep an ip if we live long enough to need more after that.

I'm starting to think about work though, maybe a day or two a week, maybe my own business. Just think I might get bored after a while if I don't have a job in between trips out.

 

To answer @MTR's question about retirement... I am thinking about a smart way to diversify investment income. I could have an unencumbered IP worth around $550k by the middle of next year. Say the rent is $450pw. That's $23,400 per year. It's really not much and represents a low return for the amount of capital trapped in the property. However, subject to borrowing capacity, I could take out an investment loan of $400k to invest in an ETF or LIC.

Not saying this is a good fund, just using it as an example, Vanguard Australian Shares High Yield ETF (VHY) has a long term return of around 10%. So I invest my $400k in VHY earning around $40k in fully franked dividends? Not sure about that last bit.

Anyway, that boosts the return from $23.4k to $63.4k per annum. Of course there is around $16k of interest plus rates and other costs for the IP and management fees for the fund. Let's say after all expenses, which are tax deductible, I am left with $40k cash. I could reinvest that to buy more VHY. After 10 years I think I could have over $1,000,000 in VHY? At that point I could always sell down enough to pay down the original $400k loan. I would also expect the IP rent should have increased to $500 pw. Gross income after 10 years should be at least $86k.

My issue is knowing nothing about ETFs and LICs. What difference does Franking credits make? I wouldn't know. Also, I have not considered depreciation on the I.P. which is a new build, so depreciation should be a nice boost. In reality, I would easily be able to reinvest $50k per year into investment funds, which would boost the final outcome a lot. However, I would not just randomly just pick one fund. I would more likely choose 4 funds across different sectors. This would lower the yield but be less risky. Lucky I don't want to retire in 10 years

 

Or at the 10 year point, keep the loan but set it to P&I and keep investing any surpluses into funds. The loan would pay off over time and the balance of the funds would keep increasing.

 

Having read a few responses, it seems most here now have several millions equity trapped in IPs but the actual net cashflow doesn't seem that high.

If you took your current cashflow and divided by your equity trapped, you'd hope you're getting 10%. That's the cost of equity.

Thus if you have $3m equity trapped I don't see why you're not getting $300k income. If you're not it should be made up by CG projections.

 

I think this is the only stumbling block, I still need to teach my children how to invest their money. Both good with money but not interested at this point in time. Tried to get them to start with books, did not work.
Hopefully things may change?

 

so what is a moderate lifestyle income the 64k question. i reckon 100k net will be plenty for most. but less than 0.5% have this in income at retirement

 

$64k -$100k -$200k

All depends on individual wants and lifestyle choice

Single - living at home - no kids - $64k would do it

Family -kids- want to see world in comfert -$100k would do it

Throw in high social life - club memberships - few toys - even $200k may not be enough

 

Maybe its 64k sash lol

 

It's always amusing to read how everyone on here is easily a millionaire and has easily reached 100k passive income...

Makes real life stats seem so false...

 

I can retire on property alone in time, but it's not the best return. Will be a combination of property and shares. Shares give a much better return, my figures are showing 30% better net returns in shares.

Sorry for going off topic again. Been running the numbers through the budget calculator again and again and I struggle to see how a couple can live comfortable on 30k living expenses. I know others can do it from responses, I just can't, and that's with me being a tight bum, the numbers still clock over 30k.

 

I missed the part where everyone on here has said they have 100k passive, and/or it was easy?

 

It would cover bills for us, with ppor paid off but not much left for lifestyle. Each to their own though. No point in keep going over it, people have different starting points and wants. Some may have lots of requirements and toys etc already paid for etc etc.

 

But Euro is also operating a business

 

that was my point? not everyone in this position??