How much income do you need to live the dream?

We'll be doing that in September when hubby retires. We've sold down a few properties, but kept a heap of them. With a paid off PPOR and no non-deductable debt, we really don't need that much. Also, as the income is split, the income tax liability won't be as high as just having Hubby on Salary. If we find that the income side of things is too lean, well, we'll sell some more. Actually thinking about letting go another one in Campbelltown too, so we'll see what the market is doing come spring.

 

Good point OC. That's what I was getting at with what does "the dream" mean. My number for financial independence and what I'll need will be very different to the number for me to live like vinny chase.

 

I feel the same way. I'd rather get Hubby off the work treadmill and go live life, than keep him there, slogging away indefinitely for a better payday at the end. I can see clearly if he were to hang on for another 5 years, that we'd be in a much, much better place, and I am soooo jealous of all the people buying up big in QLD, because I'm not, but it would just be greed driving me if I insisted on him working another 5 years. It's time to say 'enough', and sometimes that can be hard to do.

 

Barcelona, desde hace 2 años.

 

My calculation was simply earnings now minus what I pay on mortgaged, we live fairly comfortably and I don't really need any more .

 

Don't forget CPI increases - ie someone who is 'comfortable' on $100k today - will need $135k in 10 years time, based on simple 3% growth year on year.

Furthermore, keep in mind that before you exit the workforce - there are generally 40-60 hours a week when you are 'at work' and more often than not spending less money than you might be once you retire.

Just a couple of things to keep in mind.

 

Good on you skater, sometimes greed could derail the initial goal and lose the meaning of investing.

 

So what's a typical day of living The Dream look like to you guys?

 

Good point, I was looking at it on today's money. Does rental return rise in line with CPI?

I would like to caravan round AU when I retire, I don't think expenses will go up as we will mostly be chilling out somewhere nice but once the travel is over our home based costs may rise.

 

A mil wow!

I will be up to around 420k pa plus after all my builds and properties are rented later this year....and this is not net just gross. Lucky to have 30% net after all expenses.

For a million net you will need about $25m net in quality assets.....I can;t say I will be inclined to get to that point. But hey if you can get there why not...it is hard work though....

 

Rental returns won't ALWAYS increase - there will be certain markets in which rental returns reduce - over supply, less demand etc.

Either way, you aren't buying a tenant and you aren't buying a rent roll. You are ultimately buying an asset, first and foremost you need to be selecting a location which has all of the right drivers for capital growth. It is then about selecting the right asset type for the local demographic and a specific property that will be readily tenant-able (your end income stream).

Rental income today won't help you retire in 10 or 15 years time. Good capital growth over that time will provide the net asset position you require to exit the work force and not be reliant on the government funded pension.

With increased capital growth (where all things are equal) you will see an increase in rental returns as well which will assist with the retirement funding. A property which is neutrally geared or even slightly negatively geared today - with growth overtime - will become positively geared and assist in that dream of one day driving the caravan around Australia!

 

With no debt, we could easily live off $100k per year.

But let's call it $200k.

 

One more thing to keep in mind.

If you are retiring with a largish portfolio, your income will keep on rising. For example, if you have one property with rental increases of, say, $5pw pa, you only get an increase of $260 per year. Hardly anything to write home about........BUT if you have 10 properties churning out increases of $5pw, pa each, that increase rises to $2600.

Of course, that's simplistic, as expenses rise as well, but lets just be really conservative here, - just like my $5 example, as many would rise more than that - and say that the expenses have just taken half of your annual increase. You've still got $1300 extra, each year!

I have many in my portfolio that I have had for more than 10 years, and I can tell you with absolute certainty that each and every one of them has had their rent rise well over $50 during that time. In face most of them would be well over double that amount, some triple, and these are mainly in lower socio areas.

 

Great point @skater, not to mention the equity in the properties increasing as well!

 

Wait, you increase it by $5 p/week and they give you $2600 a year?

THAT IS WHAT I HAVE BEEN MISSING ALL THESE YEARS!!!!!!

 

Voted $60k - $80k per year.
Would be more than enough for a couple living debt free.
No shame in aiming higher though

 

Is you have to be good at maths.

 

Oops Having a blonde morning here.

 

LOL! I normally am.....but obviously not today.

 

There's been a bit of that around here lately, what's an extra 0 here and there