How many investment properties do i need to retire

Capital expenditure requirements are not uniform over time. New houses will have very little money required to be spent on them, with many items in the property covered by warranty. On the other hand, a house that is twenty plus years old may have suffered years of deferred maintenance, which some future owner will eventually have to pay.

Plan your portfolio to anticipate these capital expenditures. Simple strategies include having your properties well-maintained during their lives rather than letting repair items build up and compound. You might also develop a strategy of owning older houses and re-developing them when you are getting close to retirement, so that you have a portfolio of new houses at that time. Our calculations so far have been about debt-free houses. You can carry a lot more debt while working than when retired.

While you are working you are earning income from your occupation and paying income tax. The negative-gearing loss induced by your rental property loans is offset against your employment income and results in a tax refund. This enables you to carry higher levels of debt than you might otherwise choose to.

But once you are retired and the work income ceases, your interest rate is felt at its actual rate of 5. Suddenly your property portfolio is much more sensitive to interest rate increases and interruptions to income.

You will need to develop a plan for your property debt as you approach retirement. Some options include converting any interest-only loans to principal and interest ten or more years prior to retirement; selling some properties and using the equity to repay debt, or using lump-sum superannuation payouts to make principal payments.

Each of these options has taxation implications and you should run the scenarios past an accountant experienced in property investment. Can you go into retirement while still carrying debt on your rental properties? Yes, as long as you have established both an equity and a cashflow buffer.

You need an equity buffer to allow you freedom of movement with your property decision making. Cash flow income from property refers to rent received which is one form of income. Bear in mind that some areas have yields up to 6 per cent plus gross, or 4.

Living off equity and capital growth can significantly reduce the amount of property needed to retire, or greatly increase your return compared to just rent alone.

Assuming a fairly conservative growth rate of six per cent per annum compounding which is lower than the nine per cent sixty year historical average , property should double in value approximately every 12 years. Keep all your properties forever and leave them to family or charities as inheritance. Keep only your home forever and pass that on as inheritance when the time comes, and instead sell your investment properties over time.

For example, sell one at retirement around age 65, then another every ten years. Of course, any other investments and superannuation on top of your property portfolio will improve your retirement income. I think investing in property is a more stable investment when compared to other Avoid these marketin Investing for cash f Property never goes If you decide to apply for a credit product listed on Savings.

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