How Many Investment Properties Do I need to Retire

How Many Investment Properties Do I need to Retire

Have you wondered how many investment properties you would need for financial freedom?

I’ve found that while most property investors hope and say “one day I will replace my everyday personal income with a constant flow of rental income from their extensive portfolio of investment properties” but most people have no idea on they will get there or where they should start.

So just how many properties does it take to enable you to quit your day job and live comfortably?

Well, it depends on what you believe living comfortably is for you. So perhaps the first thing you need to look at is what are the individual goals you have set yourself.

Importantly it doesn’t matter how many properties you own. What is more important is the value of your asset base and how hard you can get your money working for you.

So the first question is how much do you think you need to live comfortably?

Think about your income now and how much you would need to be comfortable in the future allowing for things like inflation. It always surprises me how many people fail to think even about this most basic goal setting. You can, of course, sit down and work this out for yourself, but if you need help, we have several Financial Planners we can recommend who can meet with you and complete the calculations.

You have a goal now we need a plan for a life of abundance!

This is the second thing that often amazes me. The number of property investors who have managed to sit down and set a goal that they want their properties to replace their income, but haven’t thought beyond the goal about a plan of how they will achieve financial freedom.


They don’t have a plan. They hope it will happen, or worse they keep changing their strategy because they don’t have a plan that guides them, and, as a result, they purchase the wrong property at the wrong point in their investment cycle.

As the saying goes, ‘fail to plan and you end up with a plan to fail.’

So what is your plan? Do you know when you should buy a property for capital growth or when you purchase an income producing property?

Now often we meet property investors whose plan is to live off rental income and with historically low-interest rates for many this plan is working very well. What concerns me about this project is what happens when the tide turns, and interest rates start to rise. For my experience, it is very rare for property investors to grow a portfolio of cash flow positive properties sufficient can produce a reasonable income with rental returns alone.

Can you live off just the rental income of a property portfolio?

Let’s say your goal is to have an annual after-tax income of $100,000, this is a before tax income of nearly $140,000.

Now let’s assume you have an average rental yield across your properties of 4%. Working backwards that means you will need around $3.5 million in property equity to produce that sort of income.  Now if you are relying on the rental income and saving alone to create that kind of equity you plan is probably going to struggle.

So how do most property investors achieve long-term financial freedom?

From our experience at Awesome Lending, the clients who have been able to do this are those that use a mixture of capital growth and cash flow generating properties.  Now for a lucky few, they have been able to find properties with positive cash flow and capital growth but it is not typical.

So while we would all probably prefer to own only one high-end property with positive cash flow to make the management of it as easy as possible, the reality is you’re probably going to need to own several properties.

More exclusive suburbs for capital growth to create an income and some lower value, high rental yield properties in the outer suburbs of the city or regional towns around the country to have a more positive cash flow mix. This is because while capital growth can create income, it is difficult to release it regularly enough to create the cash flow required to service your loans under lender testing criteria.



It is also important to understand that your investing will move in cycles. Depending on your situation you may start by growing a substantial asset base of high growth properties while you have spare income and cash flow, then transitioning into a lower loan to value ratios (LVR) loans or cash-producing properties like regional or commercial property.

How do you transition into the lower land to value ratio (LVR’s) properties?

Stop (or slow down) buying properties, so that while the value of your portfolio keeps rising, the loans remain much the same.

Add value to their properties by completing some small cosmetic improvements such as a lick of paint, new carpet, bathroom & kitchen. Most of these types of renovations or improvements can cost under $20,000, but you would be amazed at how much value they add therefore creating capital growth.

Instead of opting for interest-only repayments implement the payment method of principal and interest. Therefore, you are building equity in the property by reducing the principal

don’t just make the minimum payments, if you have some extra cash then make some additional payments.

Do you need help with your plan? Why not contact Awesome Lending Solutions for help with this most important step of a property wealth creation strategy, or as we like to call affectionately it Property Acquisition Plan that can help you build a substantial asset base.

What can our property acquisition plan help with?

The Property Acquisition Plan is a strategy development that depends on the growth in your current property portfolio, your goals and strategy as you build your asset base.

What the Property Acquisition Plan does is allow you be patient and enjoy the ride of the property cycle.  It will also help remind you of you long term plan as you go through the ups and down that you’ll experience.

After all, over the next ten years, we’ll have good times and bad.

There will be periods of high-interest rates and times of lower interest rates. And we’ll have periods of high economic growth, but there will also be downturns.

Savvy investors count on the good times but plan for the downturns by having a property acquisition plan, as well as finance, asset protection and tax strategies to make sure they set up their structures in the most efficient way.

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