Posted on May 21st, 2024

Retiring on an additional $100K with property investments

While it may seem a fair way off for many, retirement is something that we should all be planning for as early as possible. With the cost of living constantly on the rise, it’s important to have a solid financial plan in place to support yourself and your loved ones during your retirement years.

Property investment has consistently proven to be a reliable and profitable way to secure a comfortable retirement. In fact, many successful investors have been able to retire early with the help of their property portfolio. So, if you’re looking for an additional $100K to supplement your retirement income, property investments can help you achieve that goal.

Is property a good investment for retirement?

Buying property as an investment for retirement means focusing on long-term growth, rather than short-term gains. It’s important to research the market and choose a property that has the potential for growth in value over time.

Owning a rental property can also provide a steady stream of income during your retirement years. As long as the property is tenanted and maintained well, you can rely on this monthly income to add to your retirement fund.

Property investments can provide a level of stability and security that other investment options may not offer. The value of properties is less volatile compared to stocks or businesses, meaning you have a better chance at securing your retirement goals without exposure to high levels of risk.

The most recent data from the Reserve Bank of Australia shows that property values have increased by an average of 11% per annum over the past 5 years, making it a reliable investment option for long-term growth. So, if you are considering using real estate investing as a means for building wealth and securing your retirement, the earlier you start, the more time you have for your investments to grow.

Retiring on an additional $100K with property investments

Want to retire on an additional 100K per year?

The plan to achieve this is quite straightforward.

You need to create a $2.5 million debt-free portfolio returning a net yield of 4%.

Building a four-property portfolio is a solid strategy to reach this target. Even with a conservative estimate of doubling your properties’ value every 15 years, you will be able to reach your retirement goal within a relatively short timeframe.

How much do you need?

When deciding how much you need to lead a comfortable life in your retirement years, the exact figure is going to be different for everyone. While $100K per year may be enough for some, others may need more or less depending on their lifestyle choices.

For an individual aiming to retire on an additional $100K annually through property investments, strategic planning and smart financial moves are essential.

Let’s use a fictional example of Alex and Jamie who started their property investment journey in their 30s with the goal of generating a retirement income of $100K per year. They purchased their first investment property for $625K. The rough rule of thumb is to allow 15 years for a property to double, then they sell off 1-2 properties to pay down debt along the way.

With careful financial planning and leveraging the equity from their first property, they were able to purchase a second property two years later. This pattern continued, allowing them to acquire a portfolio of four properties over six years. By the time they were ready to retire, the total value of their portfolio was around $2.5 million returning a net yield of 4%. By harnessing the power of appreciation and strategic purchasing, they were able to achieve their retirement income goal of $100K per year.

By remaining patient and following a long-term investment strategy, you too can achieve your retirement goals through property investments.

Should I sell investment property before retirement?

At Ironfish, we recommend a buy and hold strategy when it comes to property investments. This means that you hold onto your properties for the long-term, rather than selling them in the short term for quick profits. There are a few reasons why this is our preferred approach:

Capital Gains Tax: If you sell an investment property before owning it for at least 12 months, you will have to pay 100% of the capital gains tax on any profits made. However, if you hold onto the property for more than 12 months, you may be eligible for a 50% discount on the capital gains tax.

Rental Income: As mentioned earlier, one of the main benefits of investment properties is the rental income they generate. By selling your property before retirement, you are giving up a steady source of income that could have helped fund your retirement.

Potential for Appreciation: Property value tends to increase over time, especially in desirable locations. By holding onto your investment property for the long-term, you have a higher chance of benefiting from appreciation and increasing the overall value of your portfolio.

However, there may be certain circumstances where selling an investment property before retirement makes sense. Some reasons include:

Cash Flow Needs: If you are in need of immediate cash flow for personal reasons, selling an investment property before retirement could provide the necessary funds. However, this should only be done as a last resort and after careful consideration of potential tax implications.

Retirement Plans: Depending on your retirement goals and plans, it may make more sense to sell your investment property before retirement. For example, if you plan on downsizing or moving to a different location for retirement, selling your current property could help fund those plans.

Buying right property for retirement

When considering property investments for retirement, it’s essential to choose the right properties to maximize your returns and achieve your financial goals. Here are some key factors to consider when selecting properties for retirement:

Location: The location of the property is paramount. Look for areas with strong rental demand, good infrastructure, amenities, and potential for capital growth.

Cash Flow: Positive cash flow properties can provide steady income streams during retirement and contribute to financial stability.

Growth Potential: Look for properties in areas with strong demand drivers such as population growth, employment opportunities, infrastructure development, and proximity to amenities.

Long-Term Investment: Property investment for retirement is a long-term endeavour. Focus on acquiring properties with the intention of holding them for an extended period to benefit from capital growth and rental income.

Professional Advice: Seek advice from experienced property professionals, financial advisors, and property investment specialists when selecting properties for retirement. They can provide valuable insights, market analysis, and the right advice based on your financial objectives and risk tolerance.

Summary

Retiring on an additional $100K per year with property investments is not only highly achievable but also beneficial for long-term financial security. By selecting the right properties, focusing on cash flow and growth potential, and seeking professional guidance, you can maximise your returns and achieve your retirement goals through property investment.

Property investment offers a reliable and profitable path to financial freedom during retirement, but it requires careful consideration and planning.

At Ironfish, we understand the importance of retirement planning and offer tailored property investment solutions to help you reach your financial goals. Our team of experienced professionals can guide you through the entire process, from selecting properties to managing them for long-term success. With our expertise and knowledge, we can help you build a property portfolio that sets you up to retire with confidence.

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