We want retire...but we don't know how....

Ha!

 

Can you please explain what I need to watch out for in the borrowing to park in offset? Little worried!

 

See
Tax Tip 1: Parking borrowed money in an offset account https://propertychat.com.au/communi...ing-borrowed-money-in-an-offset-account.1313/

and this may also be relevant
Tax Tip 3: Mixing Loans - Don’t do it https://propertychat.com.au/community/threads/tax-tip-3-mixing-loans-dont-do-it.1517/

 

As I see it.

Retire now. You need $70K pa. nett rental $20K, but should increase over the years to take care of inflation. If it not income it is Below threshold so tax free, or if in one name minimal tax.

So draw $50K annually from your super to bring income to $70K. Over 60 so tax free.

Your $600K will last at 12 years ignoring any growth.

So now you are 72.

In 12 years we will assume your 7 units have doubled and are now worth $800K each. Also assume income has doubled and is at least $40K pa.

As and if required, sell down the units, one at a time. Even if each unit only netts you three years of income, that will last till you are 93!!

Your $200K offset account is your buffer against rate rises or repairs, and your PPOR is untouched.

Reckon you are in a great position.
Marg

PS: retirement is great!

 

You can retire easily today easily.

Sell all units. Say $700k after costs.
$600k in super.
$200k cash.

$1,500,000 in cash all to purchase ARG, AFI, MLT, BKI and some Vanguard ETFs for some diversification. Yield will be ~4.5% grossed up to ~6.4%.

= income of ~$96,000 per annum with capital untouched forever. Plenty to live off and travel

No rates, not insurance, no tenants, no plumbers, no electricians, no crap property managers, no stress. Why would you want to retire any other way?

pinkboy

 

Hi marg,
This is what I was hoping someone would say to us. Leaves us in control. And is what I was thinking. Don't have to sell our properties which are still rising. ...and I'm attached to some that we renovated.

And gives us options all the way along to sell as we need.

What are major risks, disadvantages of doing it this way?
Ros.

 

I just don't have any experience with these products...nor handling them.
Can I seek a manager to do this?
I am anxious about losing control of the money. And of another gfc!

 

It may not be a GFC but a TFC (Trump)

 

Assuming CGT is applicable, they'll walk away with only $400-450K in cash (INCLUDING the $200K in offsets) . No, selling isn't a wise thing to do in this particular case (in my book) if the properties are well located and sought after.

Neither is living off super, rather than the returns from super.

I'm going to be contrarian here and say that whilst you're in a decent position, you're not quite home and hosed. For example, net rent is 20k positive at record low rates..correct? What would a 1-2% increase do to that surplus? It's a prudent assumption to assume rents will keep up with CPI and rate increases but this hasn't been the case the last few years.

Also re your 70K living expenses, does that include annual travel?

And do the kids contribute /pay their share of board? Can you possibly get them out of the house and move into a cheap one bedder and rent out your PPOR seeing you want to travel most of the yr anyway. Kids need to learn independence at some stage? I was on my own when I hit 21.

If you asked me, I'd say you need to:

- ingeniously find an extra $50K pa minimum of passive income in today's dollars (via rent increases perhaps - eg increasing bedrooms in your IPs),
- reduce your living expenses or
- find a way of reducing at least $1 mill of debt.

The former is preferable b/c the debt reduction aspect will probably take years or involve selling down. And your IP's sound like golden geese - getting rid of them is not in your best interest. Your living expenses don't look excessive.

My 2 cents.

 

@Wanttoretire - I know you don't want to go down the shares route because you feel you are inexperienced. Well don't- if you don't want to. But read what @pinkboy has said carefully. Good advice often comes to us when we least expect it and sometimes when we are not ready to digest it.

The answers you might be looking for are present within the same forum. If after reading it over a period of two weeks you don't feel like LICs/ETFs (like the ones mentioned) are for you, walk away. They are hardly the most complex investing concepts in the world.

At least you will be better off for it by increasing your financial literacy.

Not advice.

 

Thank you. Great advice again.

Have you ever tried to get rid of kids? It's difficult! But they are looking around now... so could be an option.

We have spent up big last 3 years on 2 long overseas trips. Italy and Egypt....so we have decided to see domestic travel for a few years.
So $70,000 should be enough.

I don't mind work,,,,so I'm happy to just drop to 2-3 days for a few years. That could just provide enough to tide us over.

Husband wants out in February next year. But can take a year long service at 50% salary.

So effectively 2 more years at half salary, which includes salary sacrifice into super....may put us in a better position for full time retiring? Should increase the super by $100k.
Else hubby will have to start a lawn mowing business.

The Ip's were bought in 10-11 and have seen significant capital gain, are low maintenance, and we have had little to no vacancies. 2 in Bankstown ...have slowed cg, and also rental increase have stopped. 1 unit in Wollongong...started major cg in last 2 years...still going. Rental increased $90 per week just at last month. Need to keep. 1 set of 3 units on 1 title in Windang....experiencing cg now. And a new tenant just moved into one with a $40 per week increase.
And that we have progressively renovated. and so have major manufactured growth. They now have great returns, which will be realised next financial year...( no vacancies next year due to Reno).
1 small unit on central coast...not doing much.
I actually think that my overall valuations are a bit low.

I envisage net rental return next year to be more like $40000. I need to do a risk test with 2% loan increase.
We have only had the ips for 6 -7 years...and so we want to keep them longer.

Definitely food for thought. I think that I will coast along, taking long service leave holidays for next 2-3 years. Hubby can retire next year....on LSL for a year. We won't need to touch super till after that.

And we will consolidate the properties ....and review during a slower time....when property market slows down.

Thanks! Does this sound like a better plan?
Ros

 

Absolutely. We need to still consider what we are doing. We are almost in a good place....this is such a great forum for advice....I need to educate myself on more topics.
. Interesting...why don't I know about shares? Thanks!

 

Have a read of AFR - It lives behind a paywall there are plenty of articles here but remember that the contribution levels drop after 30 June 2017 so you need to contribute your maximum each to your superfunds or you won't be able to do the same again (until the laws change, wind blows from a different direction etc).

 

I have added a modest $10,000 each this year. Sal sacrifice to limit.

I am wondering if I could add the money we have in the offset accounts to our super, and whether the interest on that amount would be tax deductible?
And would it make a profit...rather than just sitting there?

I don't trust the government to determine my retirement. Which is why we want an independent vehicle.

 

Interest wouldn't be deductible

 

Alternatively...we could sell properties.

 

Ohhh. Thought it was a good idea! Since it used for investment.

 

What about using the offset monies to buy shares...for yield.

 

Sounds like a good plan.
I enjoyed my job and worked 2 days a week for a couple of years after hubby retired.
Marg