Opinion: How many properties do you need to own to retire early?

Logic tells us that the more properties we own, the more rental income we can make, and the more capital gain we can accrue. When you accumulate more wealth, in theory, you should be able to retire earlier.

But the reality is most people cannot buy properties endlessly.

So how many properties do you really need to acquire before you can retire early and be financially secure?

At a bare minimal, I believe you need to own and pay off three properties.

If you invest in three properties over 20 years or more, it’s likely most of the mortgages would have been paid off. That is, of course, on the assumption that you do not incur bad debt and default on any of the mortgages.

In this 20 year timeframe, these three properties should have, at least, doubled in value despite some periodic market fluctuations and recession(s).

Hence, your ‘early retirement’ strategy should be to sell off one property. Use the profit from this sale to pay off the mortgage on the second property and as much of the debt on the third property.

You then live in the second property, mortgage-free, whilst earning a rental income from the third property.

Obviously, the more properties you own, the more rental income you can earn without having to work in your retirement. Thus, this is why I have stated that owning three properties should be your goal to begin with.

How to address housing affordability?

Now, you may think you cannot afford to buy three properties. Housing affordability is a serious problem, especially for the younger generation and low income earners.

But my view has always been, if you cannot afford to buy where you live then you need to look elsewhere. Period.

Step out of your comfort zone and explore other affordable regional, outer-state or international property markets. Everyone can afford to buy a property – just not always in the town they initially want.

You should not be deterred from investing in property markets away from the capital cities. Good rental yields can be achieved from many different types of properties and markets.

And, remember, the younger you are when you invest, the more time you have for your investments to grow.

Why property is a better investment than your pension

It’s important to supplement your investment portfolio with other income steams, such as your pension, which is also known as superannuation.

Many people will tell you that it’s better to invest in your pension because your money is ‘protected’ by the Government. Pensions do help millions of people save for their retirement, but you need to wait until a certain age before you can access your savings.

Unfortunately, Governments will continue to increase the national retirement age as people live longer. The Australian Government is expected to progressively increase the retirement age to 70 years old by 2035. You may not even live this long to enjoy your pension.

Pensions are largely influenced by the sharemarket. A global recession could potentially reduce your pension to nothing. On the other hand, bricks and land will never be worthless even if the property market crashes.

Owning properties allows you to take more control of your financial future because you are responsible for managing your own assets and generating your own income.

So, what are thoughts on investing in property for retirement?

P. S. Apologies for the delayed post. I had been traveling through remote Africa with very minimal internet access.

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Please note, though I own a few properties, I am not a legal, financial or professional property expert. I’ve written this post to share my personal experiences and would love to hear your opinions and views.

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