Retiring through property

Hi all,

I have a positive cash flow property portfolio.



Annual cash profit is after paying off interest, rates, repairs & maintenance, insurance, property management fees etc without claiming depreciation.

I'm currently close to 50 and I work in a senior role with a decent pay.

Appreciate a review of the portfolio with pros and cons.

What would you do with a portfolio like this?

When would you retire?

 

Taking all loans back to 30 years would improve cash flow greatly.
Which one is the main resi?

 

Thanks Terry. PPOR is excluded from this.

PPOR is in Melbourne with approx $3k principal & Interest.

 

Honestly, I still haven't figured that out. But I understand that the key question. So let's say I'm aiming for $100k retirement income.

 

What are the weekly rents in regional town ?

 

Good guide is 65-75% of current income. Also knowing what you spend on what is useful to know. And its very dependent at what age you retire - the younger and fitter you are the more you will spend. Also depends on hobbies, interest, travel plans, family etc. We took early retirement at 52 and so far we are keeping to our budget expectations. Moving house introduces a lot of additional expenses and items such as Insurance (car, house, health) can expensive and not something we want to cut back on. Being able to enjoy yourself when you have the time and energy is important but also not working until you cant do these things is another factor...

 

See that's what I am struggling to understand. Yes, there is a $78k income, but I have principal and interest payments to bank. So technically, the cash is not available to me.

As suggested by Terri, I can make the loan 30 years and pay only the minimum P&I, but still there won't be enough cash to retire.

If the banks allowed all loans to be interest only, then I would have $78k passive income. Until then there is not enough cash to retire.

I could perhaps, sell 1 or 2 Melbourne property and keep the others to make it net positive cash flow after principal and interest payments.

 

Thanks Reni. Glad to know that you did it at 52.

Does the 65%-75% include rental payment or PI payments on PPOR?

 

You might be surprised at what your current equity is in some of those, the way the markets are moving. You could sell a couple of these and diversify into shares, which normally gives you a slightly better yield.

You also haven't mentioned if you have much in Super. Whilst you can't draw on it now, it will keep building over time and should be part of your overall calculations.

 

That's what I saw as well.

The table @BuilderBhai has is a little confusing. The $78k 'profit' isn't really excess at all, if I'm reading this right.

 

I would think the first column are the gross rent in regional town, as most rented between $200 - $400 pw.

 

It is net profit without claiming depreciation.

"Annual cash profit is after paying off interest, rates, repairs & maintenance, insurance, property management fees etc without claiming depreciation"

@oasis1frog The rents are higher as they are dual occupancy and triple occupancy property. The build cost was relatively lower at "mates rate". Hence the excess profit. Though its still not cash in hand because of PI and I chose to repay higher than the minimum PI.

@chindonly I do have Super and some Investment Bonds but I wanted to check what else can be done with this portfolio.

So far the ideas that came about are:
1. Reduce repayments to Min P&I to conserve cash flow for lifestyle purposes.
2. Consider offloading 1 or 2 properties either now or close to retirement date.

 

That's correct.

 

I wouldn't consider selling the regional properties. They have good cash flow, while they do not have capital growths (this may have changed in last 4 months).

Selling Melbourne property would have significant capital gains (atleast $100k).

 

OK, so what cashflow do you have left each month after ALL expenses, including the principal component of the loans if you pay the minimum?

How much cash do you NEED to fund your current lifestyle?

How much will this change once you leave work? Will you need more money, or less?