How to Mini-Retire on Just 4 Investment Properties

Brilliant
I hope they are all in Melbourne

 

Hi Phil,

Are you able to share the generic worksheet & formulas? Deleting all your real figures so you are not sharing that of course. I would love to create one for myself to see my projections. Thanks!

 

I have attached it below.

This is the more simple version, the one I use is just a mass of numbers that is not easy to follow if you don't know what it is doing.
This version may just look like a bunch of numbers too, but I have given some instructions.
Good luck with it, I make no claim of its accuracy.
If someone wants to have a go at making it slicker and more user friendly, I would love to see the result.

 

Thanks Phil for sharing. I'll take a look and see if I could use it. Much appreciated!

 

This is a great strategy as it is achievable by those on a low to moderate income. Even if you slow down in the middle (family or other reason) but stay focused it will stretch out the time line but still works well. Better to do over 20 years than not at all.

 

"doubles in value every 10 years"? Really? So 1M property (2br apartment within 5-7 km from CBD) will be 16M in 40 years?

If it is the case, then today 80K per year expenses would be equal to x00K-1M per year when a person decides to retire.

 

Look back 40 years to 1977 and you will see median Sydney house price was $37k and average male wage was $200PW.
So doubling per 10 years is not some fanciful daydream. Will it continue? Maybe, maybe not. But it is a long term trend.

 

it happened because of low price-to-income ratio, and because of low female workforce participation rate in the past

those factors have the limits, so such future growth is unlikely without significant changes in wages (but this is unlikely too because of globalisation of workforce - we still have many highly qualified people in some countries with average wages $50-$100 per week)

similar with Moore's Law. We saw how the density of transistors increased every year since its invention, but it's slowing down and very soon it would reach physical limits.

 

The trend has been going for a lot more than 40 years, and it may continue for a lot more than another 40 years. Or it may not.
That's the challenge with predictions, only hindsight works.
There are factors why it won't continue as you mentioned, however there could be other factors we don't know about that could surge prices through the roof, like hyper inflation.

 

I think the Peastman strategy can work...I have worked out a similar strategy for people who have say 20 plus lower priced properties (300-500k).

Simply sell 1-2 properties a year and trade up to a better more expensive property every second year. That would take you 10-15 years to get rid of all your properties. So if you are 50 you would be 65. By then you would have 10 excellent assets.

 

If you had 20 properties would it even be necessary to trade up?

 

it's not trend, it's observation.

look at gold prices between 1970 and 2010. Over 40 years the prices went from $39 to $1420. That is more than 'double every 10 years'. One may think in 2010 that it would be $2840 in 2020. However today is 2017 and the gold price is $1217 - lower than in 2010.

Same for oil, the oil price went from $3 to $85 over 40 years (1970-2010), now it is $48. If someone bought the oil in 2008 ($140), it is 3 times lower compared to now.

Same for many other assets. Past growth doesn't indicate it will continue in the future. That's illusion / gambling. 30-40 years period is not a long term to say "property price always grows". Everything has its limits, and many indicators tell us that rapid growth will stop soon.

There is no such law that moves property prices up. It's based on many factors/conditions, and they were significantly changed recently. Capital moves from one area to another, so sooner or later it will go to other stream.

real estate is a poor hedge against hyperinflation. It does not hold the value during hyperinflation, it has low marketability and not divisible.

what will happen if we have deflation instead of hyperinflation? even worse.

 

Depends if you want to deal with 20 properties in retirement...maybe eventually only have 6-10 really good ones with high rents spread across a couple of states.

 

Yeah, I'd take 6-10 really good properties over 20 cheapies - even if I was financially better off cashflow wise with 20 cheapies. Don't ask me why - no rational answer.

 

But if you were selling would you reinvest in more property or in shares?

 

Yeah, try this ad nauseum, not happening for most people.

 

Or multiple small, one title unit blocks and couple of houses, in select locations, so only 4-6 PMs to deal with. Easier to manage and account for.

 

Need to know why I reckon.

I hate dealing with a lot of the BS and games some PMs play, but I would take more cheapies for a time with better cash flow.... I know the reasons why exactly, but Sash has a good point.

 

Improves your odds if you buy in booming/rising markets, would you believe we have had 4 boom cycles in Australia since 2013.

 

That old chestnut..... finance, no job no loan