How on earth do I get there?

[TheBacon]

Hello all, where do I start…?

In amongst the constant looking for properties at realestate.com.au and the endless reading on here, I’ve been thinking about the end-goal; what it might look like when I finally ‘get there’. I think I’m a fairly capable guy, but the goal just looks so far away I can’t really imagine arriving there, let along getting there in a short time.

So, what is this unattainable financial goal? Quite simple really, I want an income stream of $1000/wk and a fully paid off family house in the suburb of my choice (this would currently cost around $850,000 – sure I could modify my goal to be higher or lower, but this is what I’m thinking).

Some rough calculations:

• Income of $52k/yr tax free would require net assets of approx $2.3million in today’s dollars (assuming 5% return and 45% tax).
• An of course $850k of house fully paid would cost about $850k (maybe $900k including stamp duties and costs?)
• So all up I need (in today’s dollars) $3.2million net.

I want to get there by 2015. Assuming inflation of 3% that 3.2 becomes $4.05million

I have around $1mill in assets with loans of just over $0.5mill. Assuming property increases at 7% in 2015 I will have $1.7mill and still owe $0.5mill. Therefore I will have net worth of $1.2million.

That’s nice – but well short of my target of just over $4million!!! $2.8million short!!!

If I was to adopt a buy and hold strategy as my tool to get to my goal I would need to pick up a LOT MORE PROPERTY right now and wait for the next boom. I have not yet really started working out HOW I am going to reach my target, but at least I now have a target.

Any comments, observations, help and advice on how to get there greatly appreciated J

TB

P.S. Not sure if this is general, coffee lounge, investor psychology or other. Mods please move if appropriate…

 

[aaarghhh]

Yello Bacon

Does it have to be res property? have you considered alternatives?

Shares? commercial, industrial? or if only res - bunchs of units/villas?

Something else to ponder....

Aaron

 

[The Y-man]

Income of $52k/yr tax free would require net assets of approx $2.3million in today’s dollars (assuming 5% return and 45% tax).

Isn't tax more around the 30% mark?...and returns @ 6%pa would mean you only need $1.24m

Cheers,

The Y-man

 

[Ausprop]

buy a fully franked share and the tax is irrelevant. so why do we like resi property so much???

your $2.3m could be set at around $800k with the right share

 

[The Y-man]

I have around $1mill in assets with loans of just over $0.5mill. Assuming property increases at 7% in 2015 I will have $1.7mill and still owe $0.5mill. Therefore I will have net worth of $1.2million.

Leverage: This is where you personal risk profile comes in.

For example, if your LVR was at 70% - i.e. about 1.5 asset with 0.5 owing.
Assuming the same 7%pa, you would have a net of 1.9m by 2015....

Not saying you should do it by any stretch of the imagination, but you need to explore the possibilites.



Cheers,

The Y-man

 

[TheBacon]

Well, you see this is exactly why I posted on here. I needed some other points of view to check my logic and give me other options.

No – I don’t have a property only bias. I will take my $1000/wk from any passive source J Fully franked shares are sounding good…

My initial calcs were wrong also – I would actually need around $1.9million (down from 2.3) assuming 45% tax. ALSO this is an overestimate as to get $1000/wk tax free all I need is $67k/yr before tax (http://au.pfinance.yahoo.com/calculators/income-tax.html)! This is a lot better than the $100k/yr or thereabouts I had in my head…


The target is still large, but is reduced by a lot, all in the space of 30mins on the Somersoft forum… J

TB

 

[The Y-man]

[The target is still large, but is reduced by a lot, all in the space of 30mins on the Somersoft forum… J

TB

Now just check out returns of some income generating funds (which most people roll their super into at retirement anyway)... and you may find you need even less!

Cheers,

The Y-man

 

[Dazz]

Well done - keep going at this pace and you'll be retired by later tonight....

 

[TheBacon]

Well done - keep going at this pace and you'll be retired by later tonight....

Loving it!!!

Now, just need to get that $1.3million...

TB

 

[HandyAndy888]

My end-score is approx 1.4 million, which accounts for a re-investment to cover 4% inflation per year. This scenario will yield around 60K/year before tax, my current wage...for the rest of my life....this I see as the "retirement point", from where I can pursue my life long dream of becoming a bikini girl suncream applicator . OR go back to uni to study, which I love....maybe do a PhD or something....

 

[alexlee]

I have a feeling you're going to need more than 60k a year.
Alex

 

[redwing]

Have you explored LOE for the future and the tax implications there?

$.17M assumes youy do nothing from here on in..how about picking up some more IP's, Shares, Funds etc on the way?

WE initially set $1M in assets as a goal in January 2006 and achieved this very early due to some great CG in WA and the fact we increased our asset base prior to this.

Just a quick post to say we've hit the Magic Million in Property Assets according to the latest appraisals (just over in fact).

This was one of our Goals for 2006 and we've already achieved it before the end of January.

I realise its only the paper value and worth less if we actually sold everything, however, its an achieved goal and a psychological stepping stone for us; our LVR has dropped from 71% to about 64% and we are still looking at our options for 2006.

Its nice to know that the properties values have gone up by about $95,000 (over double what our yearly income is from wages without overtime) anything else this year is a bonus..

DSR is still a problem, however if i take a new job offer this should ease up also.

Now to work on the other goals for 2006 and set the bar slightly higher for some goals (Dr X made me feel bad that I set the bar too low )

REDWING

Currently we're sitting on just over $2M in Property Assets and also Income Based Managed Funds.

We have a goal of $65k p/a tax free in our (semi) retirement in 2012, however, I know we'll surpass that as that goal is only with current holdings; we're still in a "work in progress stage" and certainly not as organised as many here (Rixter, Keithj, Michael etc - to name but a few).

Currently increasing our Safety Buffer and looking fwd to the next few years

Also coming to realise that what many successfull investors say about changing your mindset is right; just that its not an overnight thing..it evolves slowly, until one day as you chat to others you realise 'just' how much your mindset has changed

We cr*pped ourselves at a $69,500 loan, then same for a $105,000,$168,000, $290,000 loan; funnily enough $450,000 didnt faze us (though Dazzlings Lotto numbers scare the bejeezus outa me) I guess its a slow process as you climb a step, learn a lot, climb a step, learn a lot and so on.....some people take the elevator and its interesting to watch their progress also


Good luck as you progress to 2015