Working backwards

Discussion in 'Investment Strategy' started by MJS1034, 13th Sep, 2015.

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  1. MJS1034

    MJS1034 Well-Known Member

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    Hi everyone,

    After reading people's stories on this forum I have gained an enormous amount of invaluable knowledge that will help me build my property portfolio.

    One of the things I've learnt is the way to achieve your goal is to work backwards on how to get there.

    My goal in my property investment journey is to have 100k passive income by the time I'm 40 (currently 24).

    Is there a formula or a way to work backwards on how to get there?

    Cheers

    Mitch
     
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  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Use the pv or fv formulas in Excel
     
  3. Property Twins

    Property Twins Mortgage Brokers - Australia Wide Business Plus Member

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    Hi Mitch

    @MsAli and I started at around 24.

    On your journey don't be swayed by the number of properties alone.

    From experience, the best thing you can do now is sit down with a good broker and work out your servicing based on your income, assets and liabilities. Some will look at it from a transactional point of view - go with someone who is able to help you with "your" goals :) good luck!
     
    Last edited by a moderator: 13th Sep, 2015
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  4. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    I don't believe in working backwards, otherwise it's likely your only going to do the minimum of what you have to to get to your goal.
    Circumstances change all the time and stuff out of your control like APRA can affect your well made plans.
    Personally, I believe it's best to do the absolute best you can right now and you get there when you get there.
    If you make the right moves, by putting in your best efforts right now, you should reach your fin goals closer to 30 than 40.
     
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  5. Natedog

    Natedog Well-Known Member

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    To have $100k net income from property you would need somewhere between $2-2.5 mil worth of IP with no debt.

    OR $4 mil worth with $ 1.5 - 2mil debt etc

    So based on your 16 year timeframe if you could accumulate approx 2mil worth of IP in the next 5 years (using debt) and then allowing the following 11 years of growth in rent and CG, you could definitely give the $100k income goal a good crack!

    Very generalised I know.....
     
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  6. Befuddled

    Befuddled Well-Known Member

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    What about inflation? You'll probably need 150k by then to have the equivalent of 100k in today's terms
     
  7. willair

    willair Well-Known Member Premium Member

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    Might be a bit hard working the hindsight bias,unless you have made a lot of mistakes inbetween and with personal evolution you missed all the arrows of causality that come with investing..

    I don't know of any free formulas out there ,with the fanfare of experts out there selling dreams, for a small $$$$ fee they can teach you the skills required until ASIC puts them into a 4 walled cell with a lifer with a different idea on sex,but from experience most successes looking back while going forward you have too accept one limitations,understand unseen probability and risk,and every one of our successes were and still are caused by a very few slim windows of opportunity by understanding statistics without logic,and understand one simple item only a very small minority from what i have seen over my entire life will evolve into the self funded stage..

    Or read a post by a gentleman called "Handyandy" in the Investor-Psychology section ,, have your goals expanded over time,,that is one of the most honest upfront post with no inbetweens
    i have read in a long time straight from the gut..welcome to the site and good luck..

    Have your goals expanded over time?
     
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  8. MJS1034

    MJS1034 Well-Known Member

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    Thank you all for the replies. I do agree with @Ace in the Hole in saying that setting a goal may limit the ceiling my portfolio can build to.

    The plan from here is to keep gaining knowledge from the more experienced investors on this forum and buy as much CG property as I can whilst making sure I maximise my borrowing capacity by having my loans set up correctly with my broker.

    :D
     
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  9. legallyblonde

    legallyblonde Well-Known Member

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    In my mind the accumulation time frame is relatively short.. My income goal is in todays dollars... Then hopefully rents/values can exceed inflation.So it should keep the maths a little easier. It is something that can always be reassessed at a later date.


     
  10. jefn89

    jefn89 Well-Known Member

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    How are you tracking with this mate? Curious to know where the journey has taken you 2 years or so in
    I'm very much on a similar journey myself and would be great to hear your thoughts!
     
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  11. MJS1034

    MJS1034 Well-Known Member

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    Havent bought another property yet as planned unfortunately. But in saying that I did start my own (Mortgage Broking) business which is going really well but starting that certainly slowed me down a little. I’m back on track now and am ready to buy IP 2 in 2018.

    How’s your portfolio going?
     
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  12. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    Yes

    What is the yield you are expecting?
    Let's say 4% rental yield - lets assume 3% after costs take out.

    Desired income divided by net yield = amount of capital needed

    in your case
    $100,000 / 3% = $3.33Mil of property
    This is net equity so $3.33mil without loans or say $6.33 with $3.33mil of debt

    This also includes only rental properties - not your home.
     
  13. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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  14. Otie

    Otie Well-Known Member

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    I’m not focusing on a goal as such but rather making my life more comfortable in the future by doing as much as I can now.
    I’ve only started investing recently, Currently I have my PPOR which I bought 8 years ago and I’m
    about to settle on my 3rd IP in a month. I’m focussing on buying as much as I can while I can. So far I’ve only bought in Melb though.
     
  15. jefn89

    jefn89 Well-Known Member

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    Awesome MJS, recently got into the broking game myself, seems to be a trend here, although I'm PAYG (basically getting paid to learn and follow a passion of property investing, finance etc).. Very keen and likely to increase income over the next few years and who knows where I'll end up in terms of staying in the same role or working for myself..

    To your question though, I'm similar still sitting at one, aiming to build that to 2 this year, took 5 months off and travelled to Africa in 2017 and also now saving up for a future PPOR, will be an investment for now

    Few moving parts although the goal is 200K residual income by 2029, my 40th B'day, not attached to which investments although property will form a big part of that

    Looking forward to hearing more about your journey in broking and investing!