How Many Investment Properties Do You Need To Retire?
Forget about those ‘superstar’ young-gun investors you read about who had 20 houses before they were out of nappies.
You don’t need that many houses to replace your income.
Not even close.
In fact, if you’re aiming to replace a $120,000 household income, you should be aiming at 5 properties.
(Mind you, if your retirement goals are wilder, and you want holiday in the Mediterranean, cruising around in a sports car … you probably need more.)
Why 5?
The beauty of 5 properties is it gives you a significant equity boost every year.
5 properties each worth $700,000 today is a $3.5 million portfolio. And it would grow at a conservative $250,000 a year.
That’s not income of course. It’s the value of your houses going up.
Still, at a 4% rental yield you’d still have a $140,000 a year passive income.
Could You Live Happily On A $140,000 Income?
If your goal is to have a higher income, that can be done too.
But think about it for a second.
What are your biggest expenses right now?
Probably your home loan, and our strategy gets this paid off too so that’s gone.
And when your kids are grown up and out of home, that’s another expense gone too, and if you’re paying school fees then they’re gone too.
Surprisingly, an income like this goes a lot further without these 2 massive expenses.
OK, let’s move on.
What else?
Well, 5 properties doesn’t have to be the end of it. Because the more properties you have, the easier it is to accumulate more and more properties and grow your wealth faster.
Once you get to 5, things can take off scarily fast and your portfolio has a life of its own.
So your first goal is to get to 5.
When we prepare client strategies, this is our first target.
The rental income will pay your living expenses very handsomely.
And they’ll be going up in value which means you can invest in more properties. Or diversify into shares or other investments.
Or if an emergency comes up, you can tap into the equity or even sell one if you have to.
Plus, because real estate has a number of attractive tax benefits, you can potentially reduce your tax bill at the same time.
How Do You Get To 5 Properties?
Right now, owning 5 investment properties might seem daunting.
After all, you probably don’t know anyone who has 5.
And that’s not surprising, considering only 2% of investors ever get this far, despite their best intentions when they started out.
So here are my personal tips to getting to the 5 properties you need.
- Start early. Or at least start as early as you can. This means right now if you haven’t started already. The sooner you begin, the more wealth and income you’ll accumulate.
- Get the right properties. 5 random properties won’t help you much. Your properties need to be good quality properties in the right area which are attractive to tenants. Get the maximum ‘bang for your buck’ from each investment.
- Strategy. Getting to 5 can be hard if you don’t have a strategy to get there. Each property has a place in your portfolio, whether it’s for cashflow, equity or a combination.
Planning everything from the start means you have a roadmap to follow, and you know what to buy and when to buy it.
It also means the banks will keep lending you money so you can keep growing.
Mapping out your strategy at the start is vital, and it’s what we built our reputation on. I suggest you book a time with us by clicking the button at the bottom to start this.
- Location. The long term difference between a 6% growth rate and an 8% growth rate is huge. It can get you to 5 houses years earlier. The best investments are in strong areas which are just about to boom, not areas which have finished booming. If you haven’t, get our latest SkyRocket report here for the best places to invest right now.
- Finance smartly. Finance is your secret weapon to growing your portfolio quickly. Making sure you have the right loans, and you remain ‘attractive’ to the banks by keeping your finances under control. It takes some discipline, but it’s vital to borrowing more and more money on excellent terms.
- Review often. You should assess your current position every 6 months. This way you’ll know if you can secure your next investment, or if you need to adjust your bank finances. It also means you can change your strategy if your personal circumstances change. Or you can accelerate your plans if your portfolio is performing better than expected (this is common).
- Manage your risks carefully. Nothing causes an investor to fail faster than not managing their risks.
Keep a savings buffer as you grow for emergencies, maintenance and vacancies. Be aware that interest rates go up and down, and you can manage increased repayments when they come.
Also make sure your insurances are 100% up to date. And remember that markets don’t always go up, and be patient when things don’t go your way. Remember, you’re in it for the long run.
- Diversify. Don’t keep all your eggs in one basket, and don’t keep all your investments in one suburb. Invest in different suburbs and states. Combine high cashflow and high growth portfolios. Even mix up the banks you use. This way, you’re protected if something goes wrong, and it won’t unwind all your hard work.
- Be patient. Rome wasn’t built in a day, and you won’t get to 5 properties overnight. Sometimes your houses will race up in value. Sometimes growth will slow down. Tenants will come and go, and rents could stagnate over the journey. Just enjoy the ride and be patient.
So, Can It Be Done?
By now I’m sure you’ve realised that it’s very possible to get to 5 properties.
However, I’m sure you’ve also realised you need an expert by your side. And you need a strategic plan carefully crafted to get you there.
I’d like to offer you a free consultation with one of our experienced consultants.
They’ll talk to you about where you are and where you want to go. And they’ll show you what’s possible and how you can get there.
Then if it makes sense, we can build your plan for you and help you make it a reality.
Your first step is to fill out the form below to book a time with us, and see what’s possible.