THE PERFECT MIX OF FEAR AND EXCITEMENT

My financial planner recently told me that to reach my retirement goal of having $2K per week to live off I needed to save $70K per year for the next 25 year. (I was 40 then, I'm 41 today so that number has already jumped, the plan was based on retiring at 65 live (not 55 like I want) and wrapping everything up by 90).

There are some goals and objectives down a little lower if you want to jump to that..​

At the very second she said this I froze with fear, through the head back, told all the kids to leave home, sent the wife down the mine shaft to earn some money and some other irrational thoughts.

We then broke this down into some manageable chunks, which obviously led us to property investing (the share market had not played nicely with us we got in just before the GFC and still haven't broken even, we just let that problem child live in the attic, time will resolve that one).

We have our selves in a pretty good position, house worth over $750K, no mortgage, reasonable income, only one of the kids left at home, and a little bit of debt against the before mentioned problem child.

Having worked with the same Financial planner for years we have all of our insurances and protection in place so now is the time to get serious about some property investing. I've read a heap of threads on here over the last month or so and have already increased my knowledge and more importantly started asking my self and other some tough questions. The Accountant got the 20 question phone call earlier this week and provided clear direction and responses she PASSED the test, my FP is great she can stay, my Mortgage brokers seems good, my next meeting with her will be interesting, by then it will be 50 questions.

I have introduced some work colleagues and friends to my net work, like minded and balanced, and have a reliable developer I can call on at anytime for advise direction and as a sounding board.

I think I have a solid network to use and ensure I make the right decisions relating to purchasing, ownership models, taxation and accounting, and long term financial impact assessments.

I have been intrigued with the commentary on buyer advocates/buyer agents and will need to explore this further before I add one to the support crew.

Goals and Objectives (this is my excitement part)
To be able to retire in 15 years on $2k per week.

Own a multi million dollar property investment portfolio

Plan A) By a brand new house in my local area (the sub divided land behind my house), get it at the right price hopefully sub $600K hold for 7-10 years, extract the equity out of it and reinvest in future properties. (time frame 6-9 months)

Plan B) by a large block of land that is zoned for subdivision (don't care is GRZ1 or NRZ in Vic), hopefully something I can spend some $$$ on the improve the main residency to the value of the total parcel, then subdivide the back and either build or sell off for profit. (time frame 6-12 months)

Plan A & B are interchangeable based on timing.

Anyway, I hope to keep reading some of the awesome feedback, advise, stories that everyone keeps posting.

 

what about the nitty gritty?

 

Sounds like you've chosen development as your strategy to get you your critical mass of say around 3mil net worth by 65. Assuming it fits your risk profile and financial situation, I would:

1. Work out how much money you can borrow max so then
2. You know what size and location of development you can finance
3. and then learn as much and as fast as you can about development basics while you start networking with others re development opportunities and also start looking around yourself for them.

But first determine your financial capacity to fund the project because most other decisions will stem from that and you wont waste a bucket load of time of time looking at projects that you will never be able to fund. Your plans are quite vague with not enough details imo.

Just my opinion.

good luck.

 

Hey Terry,

What nitty gritty are you talking about???Probably have it covered just didn't want to put it all in the one intro message...

 

Thanks Leo2413, That sis one of my next steps, just waiting on some final $$$ transfers on some ban ktransactions then off to see my mortgage broker....

 

That's $1.75m contributions, at 4%pa it gives almost $3m and if you could continue at 4% that's over $2k per week. Obviously inflation is ignored, 4% is very low, you would have super etc etc. Still you should be able to do better than this, it seems scarier than it should to me.

Also who advised you on the shares? The same financial planner? Even if you jumped in the day before the crash the accumulation index is up.

My point is from the outside, or where I am sitting, your FP that you have worked with for some years doesn't seem to be giving great advice from what you've shared.

Sounds like a great goal and with your equity more than achievable.

Development can certainly be a rewarding and profitable experience. Development could certainly accelerate your retirement plans if done well. Do you have the experience in development to ensure success?

Do you need development risk for your goals? You have $750k equity and could purchase $3m worth of IP's at 80% LVR lending (ignoring servicing and costs).

You are in a great position, don't rush off in one direction would be my advice.

 

I don't think I have personally ever seen a FP give great overall advice with relation to building wealth. Ever. Others may have.

 

You got to get a good one.

Get one that has more wealth than you.

I found one a few years back to chat to about things. I asked him straight up, whats your biggest failure, how did you make it through, what did you learn and how much are you worth now. He answered everything without batting an eyelid. Had my respect.

 

I agree with you on this, but I think it should be quite a bit more than a person currently has.

I have no issue with FP offering advice to anyone who doesn't want to build wealth and only get some simple finance stuff in order. But as soon as they start to talk about 'investment' and 'building wealth' then imo its a waste of time to listen to them and follow their advice in a comprehensive manner (or anyone else) IF they simply haven't achieved at least similar or more to what you want, using the same investment vehicle that you are interested in.

It makes absolutely no sense. Why would anyone listen to a struggling new actor about how to be a star when they can go directly to the most accomplished actors for comprehensive advice.


OK now back to OPS topic.

 

Hi Matt

What you posted seems like a vague dream, but you probably have the plan in place. If you want to share we can critque it.

 

I would think it pretty much impossible to find a new house on a sub-dividable block in Melbourne area. Probably already been done before or when the new house was built.

 

Just looking at the new house behind that has been built on a subdivided block, still plenty of lots to buy that can be subdivided around my area, prices are going up at a crazy rate though.

 

can't say I agree with buying a new house for investment, it might work sometimes but usually it doesn't imo.

what sort of income are you and your wife on? is it fairly stable?

if you're talking about saving 70K per year I assume you must have a decent income. you're also looking to end up with 2k /week so cashflow is the ultimate goal.

why buy negatively geared resi properties then that you have to prop up in the meantime?

do you have any other savings or will deposits be drawn against equity in the house?

assuming you're financially able to id at least consider putting some money in commercial property instead. you're trying to build up passive income, if you get it right that's exactly what you'll start doing immediately instead of going backwards from an income POV buy buying a new house to rent out.

just my thoughts

 

I probably haven't got it all sorted just yet not exactly sure on how many properties I want/need what time and what value, my risk profile won't allow me to go much faster then that.

I want to get the first one or two up and running, get confident in my processes and ability and then ensure I can execute a major plan. Overtime on this forum I will pick up what others are doing and what is working for them, from that I can set my own path

The thing I know is that when I retire I want to be comfortable and able to do pretty much what I want to do. I have a value that I need, an end game if you like.

I don't want to be like most Australians and not have enough Savings, Super and Investments to achieve this and all goals need to be based on dreams be they vague or obvious.

 

Lets work out how many properties you may need to get your $2000 per week or $100,000 per year.

firstly what is the yield of the properties you will be looking at? Say it is 4%.

You divide the desired income by the yield = $100,000 / 4% = $2,500,000

So to generate $100,000 pa in income you will need $2,500,000 in unencumbered property. (ignoring expenses - lets assume a 5% yield with 1% going in cost).

Looking at $500,000 properties this would mean you need 5 of them fully paid off.

It generally takes a long time to pay off a property with income, rising rents will help though, but this will be too slow.

So you may need to get 10 properties, wait for some growth and then gradully sell 5 and use the proceeds to pay down the remaining 5.

Or you may keep all 10 and the cash flow may be enough to live on - they may give $10k each after interest on the loans and other expenses, for example.

Or you may sell 1 and slowly live on the proceeds combined with postive cashflow on the remaining.

So now your plan may be taking shape a bit.

But how to you buy $5mil worth of property? This will be the hard part as most couples I see tap out between $1mil and $2mil. It used to be much easier, but has tightened up lately.

 

Hey thanks Terry that is a pretty simple way of looking at it, and certainly helps me logically understand where I need to get to.

Just a couple of posts and I've got more work to do all of which is going to provide me with greater clarity and direction and that is why I signed up.

Thanks for your insights.

 

I'm only just starting to adumbrate my retirement plans, but I find this quite depressing.
I was hoping to achieve similar numbers. I'm mid-30s and already exhausted.

To invest 70,000 per year for 25 years to earn 2000k a week? Are these numbers starting from scratch? That's a big number for a long time for a small number. Before tax, that's earning a spare and investable $140,000pa.

Sigh.

 

I agree. Thats why we decided awhile back to change strategies to try and build the wealth faster which suited our risk to tolerance and level of commitment.

 

And that is the 64 million dollar question. Most investors don't ever get close, based on stats which i Iargely agree with.

 

Turn that frown upside down