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I am 20, can I retire by 30 through property?

Discussion in 'General Property Chat' started by Accumulo, 16th May, 2016.

  1. Accumulo

    Accumulo Member

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    My income is 91k p/a, plus ~11k USD worth of stock in a very large US technology company.

    I currently own a PPOR apartment, mortgage at -394k. Value ~550k, equity = ~156k.

    After tax I take home 70k per year, I spend about 35k of it on mortgage, bills, and living expenses. Have been able to live relatively frugally as I bike to work, and am pretty tight with money. I'm currently saving the other 35k to buy an investment property (have 20k saved up so far, currently in offset account)..

    Have 17k USD worth in vested RSUs. My aim is to retire before I am 30 by saving very frugally and investing it well, do you think this is achievable?
     
    Last edited: 16th May, 2016
  2. bobbyj

    bobbyj Well-Known Member

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    You're going to get a barrage of questions from most people based on that post I think.

    1. What does retirement mean to you? How much do you expect to live on at 30yo and onwards?
    2. What sort of investment vehicle do you want to use?
    3. Risk profile?Risk appetite?

    I think you've done exceptionally well at 20 yo to already have assets and equity.

    However, to be exact and answer your question correctly, yes. It is definitely achievable.
     
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  3. sanj

    sanj Well-Known Member

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    it is definitely possible but you would have to significantly outperform the majority of investors.

    keep in mind "retire" means different things to different people, the size of your goal is also going to affect the length of time to achieve it.

    why 30 specifically by the way?
     
  4. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Depending on what 'retiring' means to you, I assume you mean financially fee. So it depends on what number that is for you. The higher the number the greater the commitment involved. I can tell you I became financially free from when I started in 5 years with a then passive income of 100k/year. So its possible but if your number is a very large number for a 10 year period then your going to have to follow a path most don't.

    That's my opinion.
     
  5. Leo2413

    Leo2413 Well-Known Member Premium Member

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    What he said.
     
  6. Accumulo

    Accumulo Member

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    Thanks for your response @bobbyj.

    I think this might be difficult to forecast because my life situation will probably be very different when I'm 30, but after my mortgage is paid off I think I'd be quite happy on 30k post tax. That's about double what I live on right now, excluding mortgage.

    Will need to adjust that for inflation, so 40k post tax I guess?

    Given my time horizon I am thinking purchasing shares (index fund ETFs) after getting an investment property, am hoping to have half of my net wealth in property and half in shares.

    I am less concerned with market fluctuations on a day to day basis, I'd like to get the most returns in ~10 years or longer. So I think that puts me squarely in "go full on shares and property".

    I expect my job security to be decent given the sector is in demand, but that may certainly change in the future. So I want to diversify away from tech stocks and buy a broader market. Even though the stock has been doing good and just overtook to be the largest publicly traded company.
     
  7. Accumulo

    Accumulo Member

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    Just a goal for myself. It may be a little bit optimistic, but what's the harm in striving towards a harder goal than an easier one?
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You are living on $35k, so you may want to generate $35,000 pa.

    At a yield of 5% or 4% after costs you would need about $875,000 in unencumbered property, other than the main residence to get $35,000 in income (ignoring tax for simplicity).

    To get this you may need to buy 2 properties worth $875,000 and wait for some growth to kick in before selling the second one in year 10 and paying off the other.

    Or maybe 4 x $450,000 properties etc.
     
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  9. kimba88

    kimba88 Well-Known Member

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    Sounds great! But you have to make sure you live life too! :)
     
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  10. datto

    datto Well-Known Member

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    No you can't retire at thirty.

    What are you going to do for the next fifty years after that?

    Taunt us with your posts of how you're living the dream life?

    I won't have a bar of it!

    Now lift that retirement target age to fifty. At once.
     
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  11. Accumulo

    Accumulo Member

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    Thanks @Leo2413, I guess time will tell what I'd want in 10 years. Am sure my circumstances will change, but I think I'd be financially independent if I have a house + passive income of 30k a year (2016 dollars).

    Thanks Terry, do you think 5% / 4% after costs is a good rule of thumb for yield? From my research it seems to be closer to 3.5% to 4%, likewise for stocks.
     
  12. Accumulo

    Accumulo Member

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    Haha yeah I don't think I'd retire as in do nothing. I would like to spend my time fully focused on what I'm passionate about doing, I may start my own company without having to worry about keeping a roof over my head during rough times. Or maybe switch careers w/o financial constraints.

    Most people in this BigCo leaves after 3-4 years and goes off to do their own thing anyway.
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  14. Leo2413

    Leo2413 Well-Known Member Premium Member

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    If you do it through property and purely using a B&H method only then you'll need a portfolio of around 1.4-1.5m and then wait for it to double. Pay off debt and you'll get your 40k.
     
  15. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Heinz57 likes this.
  16. D.T.

    D.T. Adelaide Property Manager Business Member

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    Take an active method not a passive one and you're in with a chance.
     
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  17. Bayview

    Bayview Well-Known Member

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    Retirement means not having to go to work, doesn't it?

    Interestingly; every pensioner I've ever met should be back at work...because they always seem to have no money.

    So; retirement means not having to go to work, AND can fund the lifestyle to which you have become accustomed.
     
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  18. Biz

    Biz Well-Known Member

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    If you only need 30k clear I reckon you could do it.

    Retirement/financial freedom is overrated though. Aim for more flexibility and fulfilling work.
     
  19. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    this one liner I feel is very valuable.

    I find few people retire on property income alone............ even after 30 years of investing.

    Unless you arent relying on organic growth and can manufacture equity that you can sell or lease, and remove the reality of market and finance conditions,one really needs parallel streams if income.

    Income that can help build a portfolio fast - ie a business or top of town consulting role, and/or additional income that can supplement the "retirement" income.

    Financially free in 10 years from your start..........sure,it very possible. I know many that have done same in a year or 3.


    ta
    rolf
     
  20. sanj

    sanj Well-Known Member

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    also you'll have to keep in mind that what is sufficient at 20 has a good chance of not being so at 30. eg if you have kids.

    like some others have said above focus on active strategies and be willing to take some calculated risks others might not. as someone your age with a good income you really have very little to lose.

    also, don't fall into the default position so many people do by assuming god awful 3/4% net income on investments when calculating value of income producing assets needed.