Newsletter August 2006

RETIREMENT OPTIONS


It is becoming increasingly obvious that many of us – even those with two or three residential investment properties – will not be in a position to fund a grand lifestyle for 20-25 years of retirement.

But one investment property is better than none, as you’ll have more options than someone without any. Two will put you in a better position, and of course each addition to your portfolio will provide you with an increasing array of possible strategies.

So here are a few options for you to start considering right now:


Option 1) Plan to eat your super.

If you have some super, plan to have it fund your retirement while allowing your property investments to run at least another cycle.

As a rule of thumb, a property cycle is seven years, so put a plan in place - right now - to have your super last at least seven years.

There are websites and financial planners who can advise you how long an allocated pension will last, but a simple (common sense) measure is to divide the balance today in your super fund by your annual expenditure.

If you earn $60,000, and if you’re like the rest of us and can’t save, you probably spend all of your take-home pay. So you spend say $45,000 pa. Now they say retirees spend a bit more in the first few years of retirement – say $50,000 – so you need a super fund of $350,000 to last seven years if you were to retire today.

In which year into your retirement will your super fund be exhausted?

Which do you prefer? An adequate income over more years or an inadequate income over fewer years?


Option 2) Go into business – as a man’s barber


If you have less than the necessary investment properties to provide you with a gracious retirement, a simple business that will keep you in funds to pay the heating bills (and a few luxuries) is a men’s barbershop.

Think about it – you will only need to work three days a week, as you will be able to “job share” with an associate.

My local barber charges just $15, and at this price he is constantly busy. His shop – it’s really nothing more than a room - is in an old fashioned arcade in an older suburb near the railway station.

So every hour he makes say $45 per hour and for a 10-5 day his revenue is say $300. That’s $1800 per week or $90,000 per year.

And – not that I’ve ever asked him – his only expense would appear to be the rent. It might be $250 per week i.e. $1000 per month or $12,000 per year.

So if my assumptions were right, his taxable income would be $78,000.

Consequently, if you worked for just three days per week, your income should be somewhere up towards $39,000. But in your first year it might only be say $20,000-$25,000.

But still not bad eh?

Now my chap is probably 70, and he has a locum on Wednesday (a woman) and another chap on Saturday. And he’s currently on holidays in Italy!

Now as to qualifications – you obviously need to be able to talk about the footy and cricket, and whatever is in the local newspaper. What else? Perhaps a healthy cynicism of politicians of every persuasion would also be an advantage.

You will probably need to gain qualifications in hairdressing, but that will be a breeze for anyone with life experience. You may need a formal training contract with an employer while you’re learning, but that won’t be too difficult to obtain.

Then with that little cash business in operation, you will be able to let your investment properties run another cycle, or even further – perhaps until your body tells you to stop.

What would you prefer – having to sell your investments prematurely or generating an income while you’re still fit and able?


Option 3) Retire in Thailand.


If you end up with say – just two – investment properties, your gross rental income will be perhaps $25,000.

Add this to your allocated pension, and you could have an income of say $40,000. Not flash, but better than almost everybody else in your street.

But did you know that your money has ten times the purchasing power in Thailand?

So why not plan to spend your retirement years there? $40,000 pa in Thailand will provide with a grand and generous lifestyle.

Lots of people have already done it, and there are large expatriate communities there – from Europe, North America, Australia and New Zealand.

There are web sites that can help you explore your options, but of course you should spend say six months there before making any final decisions.


HOW I CAN ASSIST

Each of the above strategies assumes that you already have commenced your portfolio of investment properties.

I can help you with more, and also of course if you are just starting out.

We offer a conservative investment program – so we take care to ensure that you are at peace with each one that we share with you. (That way you are more likely to come back and do another with us in a year or two.)

We develop our formula by starting with “the ideal tenant” and then “what style of accommodation would the ideal tenant want?” And “in which suburb is there more likelihood that there will be a replacement tenant for you?”

Then we consider “how much can the average investor afford per week?” and “where can we expect that there will be a higher than average capital growth over the next few years?”

At that stage we can then we suggest an investment that is tailored to your individual circumstances and goals.

Finally we provide a free (computer generated) investment analysis – based on the investment value, the stamp duty payable, the anticipated rent and your tax refund (that you receive each payday).

If you had been in a position to start something like this years ago, and you already had a substantial passive income, would we be talking today?

Of course not. And we can’t afford to delay getting started, can we?

Phone me immediately! Even if it’s 2.00 am in the morning. Just leave a message and I’ll get right back to you.



Bernard Kelly 0414 778 518 www.retirelaughing.com