Buy Two Properties and Change Your Life
You don’t need to take on a complicated investment strategy to change your life for the better with property.
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But if you don’t do anything, you are certain to put yourself in a tough position in retirement.
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Most people who don’t take an active approach to their financial future might very well find themselves stuck living on the age pension in retirement.
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Currently, the full-age pension is about $26,689 yearly for singles and $40,238 yearly for couples. Even if your home is paid off, that’s not a lot of money to live on. If you retire around the age of 67 you may very well need to live on that for 30 years.
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If you’re young and working things can be very different though.
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Assuming a couple, both aged 35 and each earning $120,000 with a super balance of $40,000 continue to work and contribute to their super, they could end up with a combined super balance of around $1.3 million by the age of 67. That’s already looking a lot more healthy.
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Of course, couples have kids and one partner might not work for many years. While a lot of people may well not be earning that much money - certainly not a combined $240,000 per year.
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However, there is another way you can not only set yourself up but come out well ahead.
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It involves buying just two investment properties.
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You don’t need a massive portfolio of properties to achieve financial freedom. Instead, focusing on acquiring just two well-chosen investment properties can make a significant difference over time.
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Here’s the basic idea: you purchase two properties worth around $450,000 each. These properties should be in areas with potential for steady growth, ideally appreciating at around 7% annually with strong yields. Given that this is how much property appreciates in Australia on average, this is very much achievable.
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The beauty of property investment also lies in leverage; you don't need to pay the full amount upfront. With a 10% deposit, your total initial outlay might be around $90,000 for both properties.
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Using a compound interest calculator, over 30 years, your two properties could grow in value significantly.
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Starting at $900,000 combined, these properties could be worth approximately $6.85 million by the time you’re ready to retire.
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Even if we account for inflation and cut this figure in half, you’d still end up with around $3.4 million in today’s purchasing power. Not bad compared to being forced to live on the age pension.
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This strategy works because real estate tends to appreciate over time, especially in stable and growing markets. Unlike other investments that might be volatile or dependent on various economic factors, property tends to be more predictable.
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Plus, with rental income, you can cover your mortgage payments and even earn some extra cash along the way as rents rise and your investment becomes positively geared.
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One of the key points of this strategy is the importance of starting early.
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The earlier you invest, the more time you have to benefit from compound growth. Even if you’re in your 30s or 40s, starting now can still provide significant benefits by the time you reach retirement age. If you’re in your 20s, it’s even better as you have longer for those properties to compound.
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While the numbers do look great, it’s still important to have realistic expectations. Property is a long-term game and not something that will reward you overnight.
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There will be short-term pain, such as dealing with market fluctuations, interest rate hikes, and maintenance costs. However, if you can weather these storms, the long-term gains will be life-changing for you and your family.
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The key is to get started, but also to buy well. You don’t need the best property in the country, just one that will perform in line with averages or better.
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Fortunately, that’s very achievable.