Retiring through property

Discussion in 'Financial Independence, Retire Early (FIRE)' started by BuilderBhai, 29th Mar, 2021.

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  1. BuilderBhai

    BuilderBhai Member

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    Yes.....you are right..I'm already defensive of my choice whereas I am seeking advice...Sorry..Please feel free to give your suggestion.
     
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  2. RENI99

    RENI99 Well-Known Member

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    Good question -> It would include all cash flow - outgoings. So yes. We got a little caught out by the changeover of our loans from IO to P&I but after the initial pain and adjustment we are okay with it now and it's good to see the debt albeit slowly reduce. We had shares outside property and we maximised our loans before we stopped work (should have also extended the IO but missed that). Sold some shares and put it all in the offset accounts to minimise interest and provide living expenses. We split up our loans so that we have some the we will use for investment and some for personal use (living of equity) if we have too. Our strategy was always to downsize PPOR (which we rented out - utilising the 6 year rule) and purchased in QLD by the beach to retire to just before the prices started to go up (and Covid hit).

    We will be selling the PPOR but current thought is to hold as long as possible and take advantage of the current boom. The rent from our 3 investment properties pays our living expenses and the shortfall for loan repayments is covered by the offset cash - so cash will eventually run out but we have about 2 years covered. We have been very lucky that interest rates are where they are as high interest rates would have meant offloading more assets sooner.

    We put a detailed financial plan together 6 years ago with a lot of modelling on assets/cash flow etc using conservative assumptions and a few different strategies. That was the trigger to tell us we were okay to retire at 52 if we wanted to - then a redundancy provided a nice entry into it . I must say I was a little uncomfortable for the first 18 months not having the income from our jobs but we are ahead of plan on the modelling and I feel much more comfortable now.
     
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  3. BuilderBhai

    BuilderBhai Member

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    Sorry guys,

    Updated table. Column 2 & 3 previously had monthly figures, which may have caused some confusion.

    upload_2021-3-31_11-48-54.png
     
  4. RENI99

    RENI99 Well-Known Member

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    Very good questions - most people think its less but if you are young / fit it could easily be more - more time for hobbies, restaurants, trips away etc.. Luckily there are a lot of things you can do that don't cost too much - depending on council, community and your interests of course.
     
  5. BuilderBhai

    BuilderBhai Member

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    $13k after all expenses and minimum principal component.
    $78k after all expenses without principal repayment (current either not possible or too expensive).

    How much cash do I need? I estimate $100k to retire comfortably with same lifestyle.
     
  6. skater

    skater Well-Known Member

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    Our expenses are much less. Hubby used to catch the train to work in the City, buy lunches etc. Now we eat at home & no commute. No purchasing of suits and shirts for work either. We eat out plenty, and Hubby spends a LOT of time with his U3A mates playing guitar & performing which is free. Other things we prefer to do on weekdays (movies, etc) which are cheaper than Friday Saturday nights etc.
     
  7. skater

    skater Well-Known Member

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    OK, so you are a fair way off then.

    Do you need to live in Melbourne? Could you sell your PPOR and buy something more Regional that is just as nice, or better, and have money left over?

    You have two Melbourne IPs which seem to be a drain on funds as well. How much have they grown? Could you sell them & buy something more like the Regional one that is giving $12k passive income?
     
  8. BuilderBhai

    BuilderBhai Member

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    Reading through your posts, I think I'm where you were 6 years ago. Modelling assets and cashflow and checking out how others have done it.

    It seems scary to leave the work force if you don't know what you'll be doing with your time.

    Running out of cash due to banking or regulatory changes is what worries me. Otherwise if the banks allowed interest only loans for 15 years on the entire portfolio (without penalty interest rate), than I guess many of us would have easily retired.
     
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  9. RENI99

    RENI99 Well-Known Member

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    Yes U3A is great - our councils have lots of free activities. If you were into say helicopter flying or scuba diving you might find your spend is more...:) Lockdowns also save a lot of money. :(
     
  10. skater

    skater Well-Known Member

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    We've had our share of expensive activities. Moving to a new PPOR on the Gold Coast soonish. I'm sure we'll find plenty of finance draining fun things to do there.
     
  11. BuilderBhai

    BuilderBhai Member

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    One Melbourne IP is close to being triple in value in 12 years.
    The other Melbourne IP is double in value in 11 years.

    That's good idea to sell in Melbourne and buy in Regional as I'm interested in Positive cash flow and not necessarily Capital Growth.
     
  12. skater

    skater Well-Known Member

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    We had a mix of Regional and City (Sydney) properties. Before retiring Hubby, we sold off some of the Sydney stuff progressively over a few financial years to reduce CGT, and bought other cheaper stuff while filling up the offsets.
     
  13. RENI99

    RENI99 Well-Known Member

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    Our plan was to travel Australia, living in a caravan for 12 months and look for a place we wanted to retire too. Thats worked out really well - we were homeless for that time but that was also a good way to find out what you really need. I found Noel Whittakers books helpful - (Retirement made Simple, Downsizing, Superannuation made simple)- he talks a lot about happiness and fulfilment in retirement. We don't have kids but have parents that need assistance and having the time to do has been very beneficial.

    You also have to consider that you have remaining assets/income to cover inflation -and increase in living expenses over time. Our strategy currently is to sell most of the property and have a good % in shares with a lot of that in our SMSF. Property expenses/tenant issues (of which we have had very few) are often not easy to deal with as you get older and also if you dont have the access to equity/loans to fund maintenance or improvements.
     
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  14. RENI99

    RENI99 Well-Known Member

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    Yes definitely will. When we setup our new house (Sunshine Coast from Vic) there was a lot of additional expenditure and we are very slowly improving it and enjoying doing that as part of our retirement activities.
     
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  15. The Y-man

    The Y-man Moderator Staff Member

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    Sorry - not sure if you covered above but what are the Mel props worth at present?

    The Y-man
     
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  16. BuilderBhai

    BuilderBhai Member

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    Together they would be approx $1.25million.
     
  17. skater

    skater Well-Known Member

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    OK, so if those funds were deployed into more of your regional stock, how would your cashflow look then?
     
  18. The Y-man

    The Y-man Moderator Staff Member

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    So here's another way with a bit of a gamble.... will the props be worth $2.5m in 10 years?

    If yes, you could sell the Melb props, pay down all the regional loans.... you'll be $1.25m richer than now (less CGT)

    The Y-man
     
  19. BuilderBhai

    BuilderBhai Member

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    That's perhaps a gamble worth to take it. In that case defer retirement by 10 years and then pay off regional loans with capital gains in Melbourne.