Strategy to "get ahead" - 15 years away from retiring

Long term lurker, first time poster - so please be gentle !

I'm not sure if this is the right type of forum for this but....... Just wondering what you guys think of my "masterplan". Haven't really invested in property apart from PPOR and buying land which i've flipped upon settlement a couple of times. Mostly good luck rather than good management i have to admit.

I'm 45, wife is 40. Blessed with one wonderful child, she started school this year. Hoping to retire at 60, but we own nothing other than our own home (owned outright, no mortgage) in Sydney which is worth maybe 900k tops. Have another 350 odd in Super (thinking about SMSF options ?), own everything else, cars, boat etc. No debt.

I am super keen to purchase properties that pretty much pay for themselves, or close to it. I earn around 200k providing bonuses are met which always happens, wife is a stay at home Mum last 5 years after selling her business when our daughter came along. Unfortunately my job is in a pretty volatile industry, so whilst the money is good there is a lot of uncertainty hence me being risk averse.

So, plan in my mind is to grab maybe half a dozen properties over the next few years, with the aim being 2 or 3 per year with good returns so they "almost" pay for themselves. Logic being as rents go up they become self sufficient, if i lose my job too bad, so sad. Any rental return above minimum P&I payments goes straight into mortgage to help pay them off faster...

If i can average $350 per week rental with 6 properties that's $2100 a week before holding costs. I'd like $1500 to $2000 net as a "very comfortable" wage in retirement.

Currently been looking mostly at SE Queensland and Townsville for suitable properties. Newcastle, Bathurst, Orange and Albury also interest me in NSW.

Can anyone poke holes in my plan or provide some thoughts / guidance on the best way to do things ? I've heard a lot about SMSF and using what we have there is appealing as i know nothing about the stockmarket, but keeping all options open.

Thank you all in advance !

 

I would not follow the herd but follow the trend.

Tasmania is a rising market with strong yields, low vacancy... There is a thread on this. Don't just rely on the forum, its good for leads but the rest is up to you.

Follow this up with contacting many re agents in suburbs that are rising, Hobart within 10 km ring is moving. There is plenty of information.

MTR

 

Hi @Bartman

I understand your idea of cash flow positive - but what if the property puts is cash flow positive by a small amount, but not well located enough to give you capital growth? Would be good to find a balance.

In terms of being risk averse - if nothing changes - nothing change. If you keep doing what you have always done, you are likely to get the same results.

 

With that income and those assets.... what are you spending?

 

Have you considered properties that will grow in value over time via capital growth enabling you to potentially own 3 properties outright by selling the other 3 (at the right time). Usually cash flow positive is at the expense of capital growth but not always.

SMSF can be a great vehicle for creating wealth but you would need to get some professional advice on this via a financial planner / accountant to start with.

My advice would be to build a mastermind team of professionals to guide, nudge and direct you towards your goals. Some smart cookies on here that would love to assist you.

 

Just be mindful of where you are in years and don't take on too much unnecessary risk.

Me two cents.

 

@virgo

The "challenge" is for the stay-at-home partner to match the income of the working partner through investing (we got that from @virgo ).

For us that start through share investing, then managing the SMSF - but has since moved pretty much to property. We have purchased a number of well positioned dumps and built up a renovation system and a team of tradies.

We then had to move into multi-occupancies on all the properties (granny flats, small unit blocks) as they were draining too much cash even after the renovation.

It has been pretty full on with there seeming to be some sort of project on the go (currently converting one house and granny flat to AirBNB).

All of this produced no cash at all - actually it has been a hugh cash flow drain (along with 2 sets of private school fees) - but is has more than matched the working income with capital gains. We did some selling earlier this year to ease the cash situation - but still heavility invested in Sydney and Brisbane.

So my advice would be :
- forget property being a passive investment. You need to be continually adding value yourself.
- don't chase cashflow from property, it will probably send you in the wrong direction.
- treat it like a job, work angles to increase cashflow and capital value.
- be patient, just about all of our gains (excluding PPORs) have come in the last 4 years.
- do the SMSF and work it just as hard.

Really commit to one partner maximising their income and the other partner matching it through investments.

Hope your journey goes as well as ours did.

 

This I agree with. It takes time to figure property out. Cycles pretty much done in Sydney and Melbourne for now. If you leverage into the wrong markets you could lose money.

You're on good coin, try and dump an extra 50k a year in super, you'll be laughing by the time you're 60 and can get a tax free income stream.

 

Thanks. I have always been of the opinion that usually by the time you hear about the latest "hotspot" it's too late - and the smart money has already been made ? Will definitely have a look though, hadn't really considered Tassie - and I honestly can't say why ?

Hi. Absolutely capital growth would be great (and almost expected if you buy the right property with strong fundamentals - close to jobs / schools / shops / transport links etc ?) but it's not the "only" requirement. This is more about generating a future income stream. Capital growth would be a welcome bonus, but these are "set and forget" type investments. I'm really hoping never to have to sell what we purchase.

Love the last paragraph - food for thought. Thanks !

Great post, thank you. I think getting the right team is essential. My current accountant was great with the wife's business but hasn't got much of a clue regarding financial planning or property. And my last mortgage broker talked me out of a deal that would have made 150k in 6 months. On the lookout for smart cookies that's for sure !

Your two cents is very welcome. Thanks. If I were 10 years younger I'd take the plunge and do a couple of duplex developments in Sydney. But I'm not, so trying to be conservative.

Hi, thanks. Unfortunately my wife has zero interest in finances, property etc. Never has, I used to all the bookwork and business stuff for her. Pretty sure she thinks we have a money tree somewhere down in the backyard ? So this one is up to me, and I'm determined to get it right hence starting out by seeking advice here.

It's a little embarrassing but I don't even know what REITs are. Google is usually my friend, will consult. Commercial property holds some appeal, but in an economic downturn (which is suspect we may see in years to come) businesses are often hardest hit. My logic is people always need a place to live ?

Many thanks all for your replies. Very much appreciated !

Cheers

 

Great points Y-man, thanks ! I will give more consideration and do some homework i guess ?

Ooops ! And I missed a couple of posts earlier. Sorry !

Only recently paid off home. Rewarded myself with a nice new car, wife has one < 3 years old. Saving about half my pay each fortnight to build up a deposit for investments. We have a pretty good lifestyle, so I'd like to keep it that way in retirement, as well as help our daughter get a foot on the property ladder given how crazy Sydney prices are.

I don't "trust" super given a lot of it is based on the stock market. And i'd hate to pour money into super only for the pollies to decide suddenly i can't take my lump sum and instead need to draw a pension. That would really P me off !

 

I know that feeling

 

Or better ... find another rising market

 

Brisbane?

 

Self Managed your super and you have full control

I think there are a lot of myth about super (certain group throw FUD around super for their own interest) but it is one of the best vehicles to use for retirement building, people with little asset has this myth but if you look at the really wealthy people and I am taking people with 20 - 200m plus, they all have a lot of their asset under SMSF

going by that figure I am pretty sure they know a hell a lot than the myth going around

 

Your plan seems fine. Just have to action now while you're on the big wage.

Reduce the risk slightly by going for houses close-in rather than units. Beware high running costs may give neg cashflows for several years. Price growth, which we all need, is the big unknown. In that regard MTR preaches find the wave and jump on it.

Get your cash buffer in place and go for it

 

Is that income band of $20m to $200m net income or gross before tax ?

 

Net worth, some dude has 150 million in SMSF earning tax-free income before the new limit set in and look at all the CEO and directors of ASX companies all their shareholding are under SMSF and these are in millions not small change

 

I'd keep my super separate fromproperty investing.

I'd lookat something like this:
a. 12 Robbins Drive Albury NSW 2640 - Unitblock for Sale #122987794 - realestate.com.au
borrow deposit & costs stamp duty onyour PPOR say $220,000 withanoffset
borrow balance on units withanoffset
b. maximise super contributions salarysacrifice or after tax get maximum life insurance and disability insurance that you can throughsuper.
c. put surplus funds into offset.
d. look at Vanguard or somebodywithcheapfees to invrstfunds for your wife
e. in a couple of years time buy another property
You don't need to take risks to have a very comfortable retirement, you arealready very well set up