It may be time to remodel your retirement plans, especially if you are looking at properties replacing your income in your golden years
There four major capital cities in Australia, where the majority of us invest — Sydney, Melbourne, Perth and Brisbane. In my opinion, I recommend readers stick to Sydney in Melbourne. They not only attract larger numbers of people but also have jobs and infrastructure. Sydney and Melbourne are global cities, same as New York and England. They not only attract local investors, but overseas investors as well
The ultimate goal of most investors is to live off their investments when they retire. They want to let their properties replace their income. What most of them haven’t calculated is what the value of their portfolio needs to be to fulfil this retirement dream. Most never follow through in terms of thinking of ways to achieve it.
Most investors don’t have a strategy or a plan in place; they just hope all the pieces will fit together. It does not work that way. First, one needs to make an accurate calculation about how much money, one needs per year to retire.
Let’s assume I want to retire on $100,000 a year. How do I work backwards to know my portfolio value? By the time you retire, you might have an average $300,000 to $500,000 saved in super, which will last you 3 – 5 years. As most people are living longer, some into their 90s, they need an extra 25 years of money to live on in retirement.
Let’s be generous in our assumptions. The yield on residential properties is 4 per cent. This means that for 1 million worth of property, you will receive $40,000 in rental income. You need to pay taxes and property management fees. You might end up with $32,500 in the pocket. If you need to make a $100,000 after tax, to ensure a quality retirement, you need to have 3 million dollars in a property portfolio completely paid off.
Population Growth in Australia
Population growth is slowing nationally, but NSW and Victoria is showing a record high proportion of population increase. At the end of 2015, the national population was estimated to be 23,940,278, which is an increase of 1.4 per cent or 326,073 people over the year.
Although the population continues to increase at a fairly rapid pace, the rate of population growth has been trending lower since it peaked at 2.2 per cent over the year to December 2008. New South Wales and Victoria have recorded the greatest increases in population over the past year, up by 106,116 and 109,830 people respectively.
Across the other states and territories, the annual population increases have been recorded at 59,714 people in Queensland, 11,180 people in South Australia, 30,980 people in Western Australia, 2,110 in Tasmania, 840 people in Northern Territory and 5,271 people in the Australian Capital Territory.
Now which are the capital cities to invest in?
There four major capital cities in Australia, where the majority of us invest — Sydney, Melbourne, Perth and Brisbane. In my opinion, I recommend readers stick to Sydney in Melbourne. They not only attract larger numbers of people but also have jobs and infrastructure. Sydney and Melbourne are global cities, same as New York and England. They not only attract local investors, but overseas investors as well.
Before the global and financial crisis, NSW and Queensland have attracted a proportionally larger population. As Warren buffet said. “When the tide goes down we know who is swimming naked.” Same way when the financial crisis came, Perth and Brisbane lost all their population growth to Sydney and Melbourne. So, we know in good and bad times both these capital cities attract more population and jobs.
Incidentally, over the past year, Victoria has accounted for 33.7 per cent of the total increase in the national population (more than a third) which is a record-high for that state.
Throughout 2015 almost three-quarters of net overseas migration occurred in either New South Wales (38.6 per cent) or Victoria (34.2 per cent). Queensland accounted for just 11.0 per cent of net overseas migration over the year. Western Australian net overseas migration accounted for just 8.2 per cent of national net overseas migration.
Tools for investors
Websites, apps and books for intrepid investors
Cost: free, subscription required for premium content.
Features: This website gives you an estimate of 98 per cent of the properties in the market. It is backed up by RP data. Most of the data is recent. Premium subscribers can enjoy estimates of rent, gross cash flow and gross yield.
Cost: free, premium content for free.
Features: SQM can help you predict the property markets. SQM provides free data on sold records, gross rentals and vacant rates.
Features: This is one of best websites; I use to research on property values.
Features: You can run a background check on the builders before you hire them.
Free; IOS only
Features: This app is from Washington Brown. Make most of your investment property by claiming depreciation at the end of the financial year. Simply plug in your property value and data of construction, and the app will estimate a depreciation schedule for you.
Property Calculator Australia
Free; IOS and Android
Features: Would you want to how much does it cost to own an investment property? It gives an estimate of interest repayments per month, stamp duty and LMI. The app can be customised for loan terms, and as interest only and interest with principal. You can save each combination for making an educated comparison. Very handy tool to have on your phone.
Free; IOS and Android
Features: Using the information from RP data, investors can compare potential investment properties on the go. It uses the suburb-specific state to estimate average annual growth rate, and can give estimated on current value and equity. You can also subscribe to free reports such as TOP 20 Highest-Yielding suburbs and 20 Long-term growth suburbs.
Rent Right App
Free; IOS and Android
While Victoria’s RentRight has some useful features for tenants, it also acts as a digital organiser for landlords. You can download template emails for inspection and eviction notices, and there’s even a template for notifying former tenants of items left behind. All the relevant forms are available for download.
Free; IOS and Android
It is a very well-known app. Almost every first home buyer makes use of this app. This has a special mention again, due to its upgrade on sold properties. In the past we used to pay a premium to get the information. Right now it is available on the app or website. I recommend all the readers to check sold properties on the app.
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20 Must ask questions for every property Investor by Margaret Lomas
Getting Started in Property Investment for Dummies by Bruce Brammall, Eric Tyson, Robert S. Griswold
The Effortless Empire by Chris Gray
The Armchair Guide to Property Investing by Ben Kingsley and Bryce Holdaway