Exit strategies for retirement

That's what is so great, so much fun about property - so many different ways it can work for you.

 

Sounds like a common sense strategy to me. I was wondering how I could ever accelerate the payment of my two IP loan in time for retirement so I could live off the rent.

what type of income generating shares/trusts/funds can you recommend from your experience?

 

Rather than pay off the loans you would probably be better to save in an offset account as this could be more tax effective.

But investing in other assets in another way. e.g. to pay off the loans on 2 IPs you could buy a 3rd one and sacrifice it to use the capital gains pay off the loans on the remaining two. This might be faster than just trying to use post tax savings to pay off the loan. Capital gains are only taxed in the year of sale and there is generally a 50% discount too.

Or you could do Y-man's strategy plus selling so you get postive cash flow and capital gains.

See more ideas at:
5 Living Off Equity Strategies to Speed up Retirement

 

This is basically what we did, altough you'd need to multiply a few times, as we're still holding double digits after retiring.

 

Having retired, with a plan to sell off all the IPs, we are pausing. Low interest rates and a little boom in Queensland are causing a rethink

 

The first sign indicating one is starting to drift from a defined plan.

 

... which is a good idea if the plan is wrong or no longer the right one although I would suggest rewriting the plan .

 

That is why I say selling property is the act of transferring one’s future capital growth to the buyer .

 

I absolutely love this debt management strategy. To me it feels like it's more aligned with the tax implications of our financial system. There seems to be more incentive to stay in the game than there is to pay off your debts and get out.

 

Let's say if an IP has already been fully paid off, could you take equity out of it to implement this strategy? And when the bank assesses loan serviceability, will they take the expected future share dividend income into account?

 

That is a different strategy - borrowing to invest. Dividend income generally wouldn't be able to be taken into account in servicing.

 

Thanks Terry. So I guess they would need some other kind of salary/business income to access the equity....

 

Pick up a couple of non-exec board postings
Establish or acquire a business structured to deliver passive income
Live off retained profit built up within a company entity
etc, millions of avenues

In my experience see three important considerations:
1) Given the diversity around different scenarios everyone will have a unique set of circumstances in which they can put together the best retirement strategy leveraging their own situation.
2) "Retirement" needs to be defined. As others have touched on previously doing the numbers will help build you a framework and help to define what actions you need to take to execute the strategy.
3) The more agile your plan the better, because external events in have ruined the best laid plans for many e.g. APRA, COVID, GFC, Labor's proposed franking credit change (ok, didn't happen) etc. What else is on the horizon & how can you make sure you mitigate risks if something external does impact?

 

I don't plan on ever retiring.
But after accumulation/growh comes enjoyement.

And for that enjoyment I don't want any gov regulations dictating what i can do with my money.
No super, no apra, no banks, neg gearing, tenancy acts, land tax.
It can never be 100%, just as minimum as possble.

And it will all happen in the next 10-20yrs.
Super will be taxed more and withdrawals restricted.
Neg gearing will be abolished in the form of compartmentalisation of income/expenses on IPs.
The tenancy act will move more to favor tenants which will decrease returns.
Land tax will be increased. On an extra RIP it already can be a 10-20% of income.

Of course there's the "if you have no loans you pay tax" crowd.
Well unless you lose money, you pay tax. And losing money just to avoid tax does'nt seem a great idea. Other than non cash losses such as depreciation.

Of this all relates to "exit game" or "end game" for the chessers.
Opening game and middle game is a very different affair.

 

this is a great topic... families all over the country who have accumulated wealth are currently grappling with this

IMO, your strategy comes down to 2 basic things
- quantum of net worth
- how intact the family unit is.


At high levels of net worth and with a cohesive family structure , you become intergenetational in your thinking and can hold blue chip resi assets for growth, keep a nice PPR with an offset to park spare cash, and slowly transition to more income producing assets (shares etc).. the younger generation can maintain income servicing metrics by running a business for example and capital is pooled and keeps growing - this is basic family office planning common in many cultures.

however if you are say under $5m net worth, Australia is an expensive place to retire. You prob will need to do a combination of sell down of resi properties + downgrade of PPR. Take out a $2m PPR and $3m will only secure you about $100k p.a (comfortable but not lavish) And you wouldn’t have spare capital to assist the next generation...

nowaadays many ppl seldom retire fully and work part time - a great way to stay mentally active and top up ones income

 

1. Continue to pay down loans (to 10-30% LVR) while employing family members (so they can run the portfolio on the day to day items) full time and paying directors fees to myself to review and work out strategy for the future .
2. buy 1 or more IP if something comes up using cash flow surpluses (no bank debt)
3. sell higher yield IP and buy lower yield property later to get a easier to manage portfolio.

 

The brilliant thing with properties is it generates so much cash flows and opportunity to grow the base asset.
For the young to the retired it create a position for each of the family members to participate in the business.
When young as "shareholders looking at results".
Middle aged "the daily running"
Experienced "strategy" as a director.
Retired " director/president" monitoring.

 

That depends how the 3m gets allocated.
RE in QLD is returning up to 6% gross, so even owned outright. A no doc comm loan of 1m and ebt is around 160k