How to retire on residential property today? Is it possible

OMG, that would mean that my first grandchild would be 64 years old .

I don’t know whether I could handle a pensioner (hopefully self-funded) granddaughter .

 

Who know in next two decades,
With the exponential advancement in human bionics, genetics, Stem cells and 3d printers we are having, it may just be possible to print any organ form you own stem cells at will, and even reverse age.

So 60 may be pessimist in hindsight

 

Sorry not to derail thread but what differences did you find in NZ property market - pm’s etc? I did a quick search and some good yields still look to be available. TIA

 

Before Euro stampedes in here with an infomercial on how it can't be done. The only way is HIS way with HIS product, let me say I wholeheartedly agree with you.

The only static is that things change. You may have to do something different to those that went before, but that doesn't mean it can't be done. Some people will always have a reason WHY it can't be done. Anything from 17.5% interest rates, the GFC, to the meddling of APRA, and who knows what the future brings, but there is always SOMETHING.

Those that want it bad enough will do what it takes & will find a way. Many will try & get some success, many will try & fail. Yet others will sit on their hands & blame the generations before them, the state of the market, low wage growth, or any other number of things.

I feel that our PPOR choice helped immensely in our journey. Two three bedroom homes on the one block, for not a lot more cost than a stand alone home in the same area, meant that our mortgage was paid by the tenant in the second home. We also chose to live in one of the worst suburbs in Sydney, if you believe the sterotypes, which meant the price was really cheap.

Sorry, I've got to disagree with you there. Hubby needed a mobile for work in the 90's. It was a huge brick & cost over $1k, which back then was a considerable drain on our resources. True, it wasn't a smart phone, but the cost of calls was astronomical. We also had a computer with dial up internet. Today, our phone & internet bills are a fraction of the cost back then.

 

Biggest thing is no stamp duty and land tax so it's easier to buy multiple. Tenants, PM's etc vary the same as any country but I've never had problems. The Labour govt is currently bringing in some pro tenant changes which will further squeeze rental supply.

 

This is my noob plan to semi-retire in 15 years:

Me and my partner are both 30 years old and have recently purchased a PPOR in Sydney plus 2 CF positive IPs, one in Brisbane and one in Adelaide. We're not buying anymore right now but we're instead focused on improving our income streams and getting self employed. I'm investing in further educating myself and will run my own business in 5 to 7 years. My partner will do the same.

If the 3 properties double in value in 15 years, we will have 3.4m worth of assets and 1.1m owing, i.e. net 2.3m

We plan to move to a regional town not too far from Sydney in 15 years. So let's say our future PPOR costs 600k now, it may cost about 1.2m in 15 years if prices double. That would leave us with 1.1m to invest in diversified shares. At a 5% yield, that would give us an income of 55k a year.

So we will be semi-financially free to work as little or as much as we want, from home or from an office to make up the income shortfall.

Of course this is just a simple summary of the plan. I haven't mentioned many factors that come into play such as inflation, properties not doubling in value. Also, we might keep one or both IPs, maybe even sell them before 15 years, pay down a large portion of PPOR debt, have other draining expenses such as kids etc.

Important part of this plan is also to live a non-materialistic lifestyle. To be happy without requiring too many ''things''.

 

Keep in mind that $55k pa in income then might be equivalent to $25k now.

 

As Hannibal once said:

We will find a way OR we will make one.​

Defeat should never be an accepted option.

For many, it is their first and only option unfortunately.

 

I remember many years ago when we were broke, after yet another year of next to no income & another business failure, I asked my accountant if he had many people like us, that just kept trying something new, and if they ever got anywhere. The answer was, not that many, most just give up after a couple of attempts, but those that keep on going usually make something of themselves eventually.

 

Well said Deb.
Our plan hasn't changed that much, still another 8 to 10 years to go hopefully.
Plan is to buy the "final" house in 2 to 3 years (bottom of Sydney market), sell current PPOR and move into said "final" home at the top of the next boom (and pay off the IP's with the difference).
It's a shame that APRA has made it harder to buy though - the end income won't be quite as good but we will survive ok.

 

Guaranteed to give you a non-materialistic lifestyle

 

I could not live on this income But if you don't have a choice then I guess its OK, you live within your means.

 

Not as dramatic as the above but the following had a profound impact on us:

In FY04, our business made a $17,000 loss. When we met with our accountant, he said we broke-even.

My reply was:- “my wife and I didn’t work our arses off all year (60 hour/week, 6 day workweeks, ...) to lose $17,000. It is LOSS, don’t sugarcoat it as break-even”.

I wore that scar for the rest of my business life, vowed to learn from it and do everything in my power to never let it happen again.

I still have that scar today and we have never gone anywhere near breakeven/loss territory again. That event caused me to forever watch the numbers, monitor performance and take corrective action way before it is too late.

 

Setbacks and failures are the seeds of future success Keirank so no doubt you learnt well from those experiences.

 

@MTR I'm aiming for much higher than that. As I mentioned in my post, this is just the basic idea and I haven't mentioned things like increase in salaries, extra income from running our business, increase in rents on IPs, paying down the PPOR and IPs early thereby having higher amount of equity in 15 years etc.

Keen to hear if anyone has other ideas.

 

Congrats...that is bloody solid and realistic plan.

Most people your/partners age are not as switched on....the fact they you have done the what-ifs and executing to a plan is commendable.

What is the worst case...lest say your property is worth only...$2,5m in 15 years (mind you pretty unlkely)....you will still have $1.4m that no one else has. Even on say gross 5% yield on assets that is about 70k per annum with inflation. Allowing for 2% inflation...you willl still have about 45k in today's dollars...the remaining can be made by part time. Even if you guys earned the equivalent of 30k each in today's dollars...that is 100k with tax efficiency (maybe still contribute to super).

Well done.... great start...please advise on how your plan goes...I am at the tail end of mine...getting out with a lot properties in pain in the arse..... ....but I am pressing ahead with my plan of slowly divesting...it will take me about 10-15 years to get to a point where I am under 15 properties....assuming I don't buy anything in between.

 

People have said they plan to retire early for decades. The goal posts continually move. Markets rise and fall. Those who said this in the 1990s are still chasing more cause living costs rise. In the 1990s the dream of moving up the coast would have cost half what it does now. Look at Byron Bay

A 45 year old who retires today will need twice the capital to maintain their lifestyle by the time they are 60. And at ages 40-50 is when your kids will be wanted to be educated etc...Aged 45-60 marriages and other lifestyle things.

The greatest impacts are yet to come. Price falls perhaps, Rising interest rates. Stagnant growth maybe. Throw in a sharemarket correction affecting super and a couple of kids who want to marry and it smacks around any plan. One of the plan killers we see sometimes is serious medical issues that stop work or hamper health or provide setbacks for years. None of this can be planned. Stuff happens.

 

Just don't get caught by analysis paralysis....

IMO too many people overplan & overthink retirement planning to the point they keep putting it off to hoard more & more. .... forever chasing the elusive dream of just a bit more.

I'd rather enjoy the time at an age I'm able to still enjoy everything I like doing rather than dieing wealthy without living enough. Each to their own.

 

Good points. If it were that easy everyone would be doing it.

I think the big one is the performance of the asset, how well you buy and when you buy can make a massive difference on time frame .... and a couple other important things along the way matter big time.
.... and then life happens, if you get divorced that's going to kill it. But then again divorce rates are dropping I am told

 

Best not to overthink it...just do it!

As for planning....ole saying' ...IF YOU FAIL TO PLAN YOU PLAN TO FAIL...... at least planning gives you options....

 

On that point, I think its important to enjoy today, smell the roses.

Not all about the end goal, back to balance IMO... No point killing yourself for the end goal, if you are so focused you are miserable and stressed today.