Your target retirement capital and income

I'm not.

(sorry, recently rewatched life of Brian)

 

We were aiming for around 150 k / year but are looking at upsizing that . Maybe 4-500 . Next two years will be key

euro , interestingly it has been our pursuit of growth that has given us the capital to potentially step up to a higher cash flow return investments .

cliff

 

You have to start with a target/goal in mind, which you have done. You have to allow at least 20 years, which you are doing. For me, I also assume zero growth and 50% rental inflation over 20 years... and if it works within that framework, I execute. This way I am extremely unlikely to fall short, and very likely to exceed my goals.

 

You started well before borrowing capacity changed though... and before holding costs were ever an issue. it wouldn't be fair to ignore how that affected your outcomes. You accumulated a larger asset base than you would not have been able to accumulate if you were starting today, and have been able to hold it under IO terms far longer than you would be able to if you were starting today, all other things being equal. A couple of years or so ago you conceded that even with such a mature portfolio you encountered serious cash flow issues when P&I monster came calling and offloaded some properties to recalibrate /accommodate it..... imagine having to do way earlier in your accumulation phase. That monsters teeth arent quite as sharp as they were because the RBA has been forced into an extraordinarily low cash rate setting, but it still has some real bite when people encounter it

There's also no doubt that some people here are already past the levels required to enjoy a comfy retirement.... but the overwhelming majority are not, and wont be if they pursue strategies that failed during much more generous times. It's also probably helpful to remember that when I post about these things I am always directing my comments at those who are at the first rung or two of the ladder, not at the last rung or two.

It also helps to ask.....what , after 30 + years of record wage growth, ever lower rates, record credit expansion and record cycles of capital growth, are the demonstrable results? After all, if it is capital growth that provides for wealth in retirement, shouldn't we have a generation or two of extremely well funded retirees by now? Shouldnt age pensions be costing Govt less? So where are they all? Why are pension costs rising? The answers would suggest that the strategy has failed most people.

 

That's pretty cool! Fingers crossed his siblings take an interest too!

 

Fingers crossed. His 5 year old sister looks to be the opposite. She already has a taste for expensive clothes and jewellery. Yes a 5 year old. Takes after her mother.

 

I don't think I've said had any cash flow " problems " , certainly not serious . They would have made refinancing difficult , but we acted very early and well before any P&I Cliff .

Ironically those two properties you refer to were two that broke the mould for us . They were nice properties in nice areas that we intended to pay off with the profits from our other properties in lesser areas , but the cash flow drain WAS making it harder for us to have overseas holidays flying business class . They also DID make it harder to refinance

We got rid of them , now we've taken some profits of some of those pesky capital growth properties and paid down some debt and kept some in reserve for our next step . We have refinanced ( well, approved and waiting for paper work to go through ) .

My personal thoughts on the market are we will still see capital growth , but given the tighter lending market , It's even more important to move from market to market , capturing periods of capital growth and making sure you don't have too much lazy capital . Hobart was able to boom quite nicely .

Cliff

 

I think euros points are useful though. You have a well paid career and were buying like I was, at a time when it was easier to get higher yields, which made buying and holding multiple properties easier. I had friends that were buying at the same time as me, who were buying 'for growth' got stuck with 2-4 properties and got minimal growth. They used to think what I was buying "wouldn't get growth any time soon." I got much more growth than them and they ended up selling at a loss years later to start again.

I didn't know any better than them which properties would grow more in value, noone can predict the future. I still think that if you buy in a place with 100k or more population and aim for the highest yield you can get, and potential to create equity that's the best strategy.

 

Is there any other kind?

So lending changes did affect you?

We don't need to argue semantics. The point was, and is.... if someone such as you with a higher income and a larger/more mature portfolio faces these issues - even if they are headed off early and never really develop into "serious" issues per se, - then what are the probabilities those on lower rungs with smaller portfolio's, less mature portfolio's, modest incomes and who have not and will not be able to hold IO as long as you were, in order to secure sufficient growth to sell up to buy their way out of the problem, will? And how does that fit with / help them meet their retirement income goals, which is the topic of the thread?

And the broader question remains ... Where are all the self funded retirees after 30 years of big growth? Streets should be paved with them but they aren't. We know the growth happened, but where is the income? Seems unambiguously clear to me that 30 years of data tells us that debt reduction has to be part of the equation or asset rich cash flow poor is the result. If the goal is asset rich cash flow rich, that seems a clear failure of outcome to me.

 

if you achieve financial freedom does not mean you have to stop investing, you can still increase cashflow/wealth.
Main thing is you are able to fund this as its going to be a tad harder souring finance

For example @skater finished her second flip

I Just started a 3 unit development this year

I am not into travelling, and this stuff excites me

best thing about retirement regardless of income is having choice

 

Maybe if you read my post you'd see there are...

Again explained above

From what I've seen most of your posts are just another opportunity to promote your business . Geee , arguing semantics with someone who is promoting their business on the forum .. that brings back memories.

Hi Ellajay

If you've read my posts in the past , I suggest exactly what you've done . We rarely buy nice properties in nice areas and tend to buy cheaper properties with good cash flow , BUT paying close attention to the property cycle . What we haven't done ( though this is going to change in the near future ) is buy properties purely for cash flow .

We have bought nice properties in Sydney , because we know that market very well , live locally and watch the market very closely and after the GFC , it was a no brainer , then there was the two I refer to above .

Cliff

 

Anyway we've digressed from the topic at hand . My bad .

Cliff

 

I definitely read your posts and watch what you buy. Silly not to.

 

$10m. Organic yield 3.5%-4.0%. Nil debt. I guess it’s MOFIRE (Morbidly Obese Financially Independent Retired Early). Aim is to be done by 2024/5. I’ll check back in in a couple of years.

 

One thing I have learnt on this journey is that there are many ways of "skinning this retirement capital/income cat".

@euro73 way, @See Change way, @kierank way, ...

What works for one may not for another OR they may not be comfortable with that way.

Main thing is to find a way and just Do It.

Unfortunately a lot/most people don't.

 

Yep, so the most important part is, make a plan and do something!

 

Is that 4/500k passive and net? Is it mostly via rents or dividends?

 

I must be getting old, haven’t heard of that one. Are you restricting your assets to sustainable investing?

 

Didn't have a specific target for capital. Aimed for gathering as much as we could.

For income was to cover essentials to pay for the roof over our heads plus sufficient to do what we wanted as well as funds to continue to invest. If it turned out it wasn't what we "deserved or wanted" then adjust to fit the income available but still keep on going.

Result is better than that but my mind set is still framed towards funding basic needs (food and shelter.) The rest is a very large bonus.