Expert Advice with Philippe Brach 27/08/2016
Just how many properties should you have in your portfolio to be able to retire wealthy? The answer may just surprise you…
We all have different reasons for investing in property. For some, property is a wealth creation vehicle that will allow them to retire sooner. For others, real estate is their ticket to being able to quit their job and live off property profits instead.
Whatever your motivations to invest, the ultimate goal of most investors is the same: to create a stream of income or wealth that allows us to retire without having to worry about money.
If you’re looking ahead to your retirement age, whether it's five years, 10 years or 25 years into the future, how many properties do you need in your portfolio to be able to retire financially free?
Knowing your numbers
To me, the most important factor in this equation is knowing your numbers. Property investing is not actually about focusing on the property; it's about focusing on the numbers involved in making your deals work.
Education and understanding what you're doing and where you are going is key, because every investment decision your make has the potential to change your life – either positively or negatively.
I’ve had clients say to me, ‘I don't really know how it all works, but I trust you because I've heard great things about you.’ Whilst that’s very flattering, it’s not my favourite thing to hear because at the end of the day, it's not my money; it's your money. My job is to make sure you go in with your eyes wide open so you can make informed decisions, and I do this by showing you the process of creating wealth through property.
Calculating your ultimate portfolio
Knowing your numbers is crucial to work out how to get from where you are right now, to where to want to be in the future.
When we work with new clients, the first thing we do is ascertain their current position, including their income, debts, assets, lifestyle and risk profile. Once we have all this information, we talk about their goals.
Then it’s our job to calculate the ideal investment journey that will help them get from where they are now, to where they want to be in retirement.
As you can see, it’s a comprehensive process and it's individual to each person.
For this reason, the answer to the question, ‘How many houses should you own to retire rich?’ is different for everyone.
- If you’re aged in your 20s, have a low risk profile and a 40-year investment timeline ahead of you, 3-4 investment properties may be enough to retire comfortably.
- If you’re aged in your later 30s/early 40s, have a high risk profile and a 25-year investment timeline ahead of you, 5 high-growth investment properties combined with a renovation and development strategy may be the right way forward.
- In you’re aged in your late 50s, have a high risk profile and a short investment timeline ahead of you, an aggressive subdivision, renovation and development strategy may be required to generate immediate wealth.
It’s clear that there is no ‘one size fits all’ answer to this question and the ideal property strategy for you will usually be different to the best strategy for your neighbours, colleagues or friends.
With the right strategy in place, it’s possible for anyone to grow their wealth through investing. If you’re not sure where your property journey is taking you, don’t be afraid to reach out for tailored advice and a plan to help you create real financial security, with the ultimate goal of ‘retiring rich’.
Philippe Brach is CEO of Multifocus Properties and Finance
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property
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