The number one question I get asked when I tell people I am an investment savvy finance broker is, ‘How many properties will I need to stop work comfortably?’ And the answer I always give is, ‘It depends on how much you give yourself TLC: the magic multiplication of time, leverage, and compound returns.’ Why? Because there are several factors that go into giving an accurate answer to that question, such as what is your idea of a ‘comfortable’ retirement and when you plan on working less. The following is a rough guide that can be used as a map to your own lifestyle freedom plan.
The $100K Sweet Spot
Let’s assume that earning $100K each year when you stop work is enough to give you a comfortable lifestyle. To achieve this you will need to accumulate investment property worth $2 million net after remaining loans are deducted. As the length of time you invest is critical to achieving your lifestyle financial goals, let’s assume that you want to be able to stop working in 20 years. With these key numbers in play, you will need to invest in at least two to three capital growth properties today to reach your required stop work lifestyle income.
It’s About Time
The longer you have to invest in property, the safer, easier and better your chances of reaching your stop work lifestyle income goal. The shorter the time you have left to build your investment portfolio, the higher the outlay you need to make now to ensure that your assets can grow and mature and allow you to cash in that investment when you stop work.
Let’s use the same stop work income and endgame asset goal figures above but reduce the timeframe you have left before you retire – to 5 years instead of 20. To reach your goal of a $100k yearly income, you would need to secure between eight and ten properties today to achieve the same outcome. The less time you have your properties, the less time they have to build their value,
which means you need to have a much larger portfolio.
So, what is the number of properties needed to create a comfortable income when you stop work? As you can see, this is all dependant on your specific situation when it comes to property investment. The longer you have until retirement, the better off you will be and the fewer properties you will need in order to achieve your goals. Of course, the less time you give yourself, the more money you will need to invest in your portfolio. If you leave it too late you will financially no longer be able to reach your required lifestyle income so you will only have two grim choices – keep working long-term or restrict your lifestyle to survive on a lot less. The take home: act sooner rather than later to make sure you can live the lifestyle you want once you finish work.