Australia is home to property investment. Multi-property investors are rare.
According to CoreLogic’s analysis of data from the Australian Taxation Office (ATO) and the Australian Bureau of Statistics (ABS), just over two million Aussies held an interest in investment property in 2015.
Only 71.6% had one property and 18% had two.
Only 0.9% (over 19,000 total investors) owned six or more investment properties within the last two years.
How many properties are necessary to retire comfortably and live a comfortable life?
Margaret Lomas is a property investor consultant, author and expert who says seven properties are enough to comfortably retire.
“It’s really a value more than a number, but because people like numbers, I always think seven is about it — but we’ve got to understand how that seven then rolls out over a lifetime,” she said.
Great if you have the funds to buy all seven properties at once. For most investors, a coherent and long-term plan is important.
“If you’re like the normal, everyday person, you’re going to start with one and it’s going to take you a couple of years before you’re ready to buy a second,” Lomas said. “They might reach the fourth year with three [properties] and then by the time they get to year five and six, they’re at that point where they probably can buy two at once, and they’ve got more of an appetite for risk,” she said.
“To have a $100,000-a-year lifestyle, you need to have a clear [debt free]$2,000,000 in property. If you’ve bought seven and you’ve given those 15 years [growth], there’s a chance you’re going to get there, but I don’t want people thinking they’re going to make millions and millions out of property very quickly, because it doesn’t happen that way.”
Lomas said that unscrupulous advisors encourage investors to buy too many properties.
“I blame the spruikers for that because obviously it’s in a spruiker’s best interest to have a client come on board and buy as many properties as they possibly can, and we all know a spruiker will make their money out of a property sale,” Lomas said. “For every sale that goes through, they’re probably in for [commissions of] anything between $20,000 to $40,000, and the more they can get a particular client to buy, the more that client is worth to them over their lifetime.”
Lomas advised real estate investors to not focus on the capital growth debate versus cash flow when purchasing investment properties. Because you can have one or the other.
She recommended that you search for areas with high price-growth factors such as infrastructure development or growing families.
“Your aim as an investor is to spot growth drivers. Once you’ve done that, you’ve got to find the kind of property in that area that’s going to appeal to both buyers and renters,” she said.
Properties with the right characteristics will enjoy long-term growth and a comfortable yield of at least 5% to service their debt.
Once you’ve acquired the target number of properties, you should hold off the action for as long as possible. Smart investors will also tap into their retirement superannuation for rent and value growth.
“When you get to the point where your superannuation is starting to wear a little thin, then your property should be good to go,” she said.
Depending on your circumstances, you could either live off your portfolio’s positive rental income, or choose to sell down some holdings to reduce debt on other holdings. This will increase your total return.
“The longer you can keep them past that retirement phase and use other sources of income, the better because if you can even add five years to the 15 years you’ve already waited, that five years will make a big difference,” she said.