How to retire on residential property today? Is it possible

Discussion in 'Investment Strategy' started by MTR, 31st Oct, 2018.

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  1. MTR

    MTR Well-Known Member

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    I thought a timely thread

    In current lending environment ......how will investors do this?

    What will be a winning strategy today?

    Will it still be the buy and hold strategy?

    Any thoughts on this?

    For those who are already there/financially free, well that was yesterday, today is different beast...

    Thoughts/suggestions?
     
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  2. Brady

    Brady Well-Known Member

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    1. Paydown PPOR debt.
    2. When you have the capacity > purchase properties that generate income/profit
    3. Continue to do 1 & 2
    4. Once PPOR debt repaid > pay down INV debt
    5. Maybe sell when required.
     
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  3. wylie

    wylie Moderator Staff Member

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    Same as we did “yesterday”. Nothing new.
     
  4. Perthguy

    Perthguy Well-Known Member

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    Over how many years? In 5 years? No. In 40 years? Almost certainly.

    It depends on how aggressive people want to be. I invested for 8 years as a hobby and didn't make much. For the last years I have been more agressive and getting things on track. Realistically, I will probably be ready to retire after 20 years of investing so I really took the slow path. Others did as much in a few years.
     
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  5. Perthguy

    Perthguy Well-Known Member

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    Development will fast track this process... or derail it. :p
     
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  6. Brady

    Brady Well-Known Member

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    Yes I previously was at the APRA wall... got together $65k cash > paid down PPOR > lowered c/c limits

    Good to go shopping again, looking to buy undervalued properties that I can add value or develop.
     
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  7. Brady

    Brady Well-Known Member

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    Haha yeah that was the 'profit' section.
     
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  8. MTR

    MTR Well-Known Member

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    Right, So what did others do?
     
  9. Perthguy

    Perthguy Well-Known Member

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    You are one of "the others" I am referring to, so you tell me ;)
     
  10. MTR

    MTR Well-Known Member

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    Lol
    Developing.... but not doing this now, just eaiting

    In saying this though, I know an investor doing well in Perth but they are doing things outside the square and selling everything. Its working for them

    The other in Perth too .... will only buy well below market value in bread and butter suburbs,

    FHB market about 20-25% net profit

    However they are tradies do some of the work and save here
     
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  11. The Y-man

    The Y-man Moderator Staff Member

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    Good question - and one I face from many budding investors.
    My answer used to be "I don't know". One of the things I have noticed was that as we have got more successful I have "lost touch" with those at the start of the trail. I used to sense this when I started out and people were talking huge (to me at the time) deals that I could not relate to (or find particularly helpful).

    Here I am today however, talking how the best deals are in the $1m+ resi's etc - which really is out of the practical reach of many starters.

    Combine that with the whole "it's hard to get finance thing" and I really was pretty much at the end of my knowledge.

    In recent times, the only real guidance I could direct people to was (if they really wanted property) to the REITs - especially the listed ones as there outlay could be quite small.

    At least then we could discuss rental returns, leases, expiry dates, valuations, loans, LVR (gearing), and location, and have some skin in the game (I believe if you don't have $ in it, you are just a spectator and its all just theoretical)

    The longer term strategy being of course that once they build up enough experience "in the market" they would
    1. be very familiar with the sharemarket (and how sentiment works)
    2. hopefully made some money to use as a deposit if they want to go into resi RE
    3. know a bit about commercial/industrial props
    The Y-man
     
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  12. Indifference

    Indifference Well-Known Member

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    Yes but for current conditions you've missed a crucial step: limit your PPOR expense (either below median or a realistic multiple of earnings ie. 5-6 times)

    Once again yes but no. IMO, income vs property value divergence is far worse than 15-20 yrs ago hence, a few additional considerations become more pertinent than yesteryear:
    1. PPOR value as multiple of earnings.
    2. Cost of living controls & Nondeductible debt.
    Ie. Smartphones didn't exist in the 90's & the internet was still evolving. Modern day drains on income are far more than ever before.

    IMO, starting off now requires more deliberate focus on controlling the modern day money drains that in turn impact savings rate & serviceability. Think of smartphones, internet, streaming media, online services that have premium subscription fees etc etc.... These income drains are a modern phenomenon.
     
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  13. The Y-man

    The Y-man Moderator Staff Member

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    This one - the crucial point where I feel is the biggest difference between today and "ye good olde days".

    When we bought out first property, it was about equal to 2 x (decent) gross income of one person (working on $80kpa)

    Today, that property is over $600k. Even if pay has gone up for that $80k job, I doubt it has gone up to $300k pa!!:eek: .... more like $100~120kpa

    Ok - even if you took the same property out double the distance from CBD, I think you would still struggle to find it at $240k

    The Y-man
     
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  14. TMNT

    TMNT Well-Known Member

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    One thing for sure is that there is no quick and easy way in the next 5 years

    Unless you get super lucky
     
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  15. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    retire on property


    too open ended ??

    what income

    what age

    what year

    ta
    rolf
     
  16. ellejay

    ellejay Well-Known Member

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    I followed a couple of NZ guys who got rich and retired early buying higher yield residential properties so this should still work today but you need to be creative to get the volume required and then you sit and wait for the equity and rent increases.

    I.bought a few in NZ e.g Napier bought for $210k now valued $350k rent $380pw. Hastings bought for $170k, value $250 rent $350pw. 2 units in Hastings bought $130k each. total rents $280 each pw. Govt tinkering in the market is pushing rents through the roof (well done Labour). I'm finding growth of my cheaper places was just as good as my neg geared Aussie ones so I'm selling them to pay off debt.

    I moved remote to earn max salary and saved every cent for about 5 years to do this. It wasn't hard, it's been an incredible few years. Yes I think it can still be done but you probably need more creativity depending on your budget and resources of course.
     
    Last edited: 31st Oct, 2018
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  17. kierank

    kierank Well-Known Member

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    How to retire on residential property today? Is it possible?

    I never thought it was ever possible. That is why our strategy was to buy property (in personal names and trusts) for growth and shares (in SMSF) for income.

    Now that we have been retired for 8 years (hopefully, at least another 30 to go :D), I am happy with our progress so far. Our asset values (both properties and shares) are continuing to rise, our cashflow (from our shares as our property portfolio is NG :eek:) is more than what we need to live on, our cash buffers/reserves are increasing (fully chocking up our Offset accounts), ...

    The one thing I underestimated in our strategy was the amount of work and cost involved in managing a property portfolio - rent reviews, maintenance requests, renovation projects, land tax, troublesome tenants, etc. These didn’t faze me in accumulation phase but, in retirement, they are a pain in the ass. Lucky we have achieved good property growth over the last 40 years (by always being in the right place at the right time :)) to offset this pain. At some time in the future, we might hand control of our property trusts to our kids and grandkids :eek:.

    Compare this with the management of our SMSF. Once a year in July, we transfer electronically our pension payment (currently minimum of 4% of balance) to our personal bank account. Such exhausting work.

    Definitely happy with our strategy so far.
     
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  18. Brady

    Brady Well-Known Member

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    Wasn't missed.

    My PPOR debt is 2 times my annual gross income :)
     
  19. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Hi @kierank,
    I didn't realise it while interacting with you in past posts,
    I try hard to discuss only the point and not argue for the sake of argument but I apologise if I came across as disrespectful to you or to any one in this forum in any of my past posts.

    I am not a believer so can't pray, but I sincerely hope you have another 60 to go.
     
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  20. Indifference

    Indifference Well-Known Member

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    Sorry @Brady it wasn't a comment about your personal situation.... I have no idea or concern about that in anycase

    Comment was in reference to your 5 point response to the thread topic that IMO didn't highlight a key issue required to address OP's question...
     
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