How many properties do I need to retire comfortably?

How Many Properties do I need to retire comfortably? 

In this article I'm going to look at how many properties you need to comfortably retire on.

I'm going to start by asking some questions that help you define what ‘comfortably retire’ means to you, followed by an example of how you can put that into practice to build long term sustainable income.

Finally, I’ll wrap up with a few key takeaways that you can implement yourself. 

Some people may have a different perspective on the best way to do this, that’s fine, these are the steps that have worked for me personally when buying property.

Again, this may not be detailed enough for some of you details people out there, or, it might be too detailed for some of the big picture people out there. Please get in touch if you are one fo these people and want to see more information.

Lets jump in with… 

As usual, it’s not one size fits all (and never will be with property!).

The answer will depend on….

Where would you like to retire? Thailand is cheaper than London. 

What sort of quality of life would you like? Are you happy with the basics, or do you want to be travelling first class? 

What age do you plan on retiring? If you are retiring early then you will need an income source that won’t run out and you need it sooner. You need to be more aggressive. 

Would you like just income or do you want to be building up a pot of capital? If you want capital as well then you need to focus on having paid off properties come retirement. 

What else will you have to live on? Are you relying just on properties or do you have National Insurance and other sources of income? 

Focus on the outcome

How many properties do I need to retire on…. This is a very open ended question, and one that's made easier to answer when you know what target you are aiming at. See below on goal setting.

 Like most things in life… you won’t hit what your not aiming at! 

Start to define what retirement looks like for you. Does your ideal retirement need GBP1000 a month income? Or, Does it need GBP1000 a week? 

Once you have a target income in mind, you can work back from there, and see how many properties you need, and by when you need them paid off. 

Example; 

I was chatting to a friend last week who wanted to retire with GBP30k a year income from property. He’s 35, and wants to retire at 60. 

So how many properties is 30k in income? Assuming a 5% yield it could be;

• 1 property at GBP600k
• 2 properties at GBP300k
• 4 properties at GBP150k.
• 6 properties at GBP100k. 

These are at today's prices. 

Which is best? Diversification is always a good thing, and when you are relying on the income to survive, it would be foolish not to diversify. So, in this instance 4-6 properties would be best.

Different types of property, in different geographic locations, ensuring diversification… if one property is empty for a short while then you only lose 25% of your income for that period. As opposed to all of it! 

His plan is to buy a property every 1 - 2 years with a 30% deposit on each. A 70% interest and repayment mortgage covers the rest, which is paid off by the tenant. Mortgages are usually for 25 years, but if you overpay them and work hard to pay them down they can be cleared in 15-20 years (bit more on mortgages below.

 These are at todays prices… what will they be at taking into account a very modest property growth of 3% per annum for 20 years? 

The GBP600k portfolio will be debt free and valued at just over GBP1m with a potential income of GBP50k. Which will be there or thereabouts in line with inflation, so your spending power is the same. 

What does the future hold?

It’s difficult to know what the future holds, but getting started as soon as possible is the best thing to do (in my opinion), time moves pretty quickly (as Ferris Bueller once said) and making a sensible financial decisions now will quickly compound into ‘greenlights’ (as Matthew McConaughey once said! See below).

 In the above example my friend will also have his UK state pension, plus some income from stocks and shares he has been investing in - all together this puts him in a very strong financial position for retirement. 

Everyone's situation is different, and everyone's goal for retirement is different. Therefore start by writing down what it looks like for you;

Where?

When? 

How? 

And then work back from there! 

Hope you found this useful, even if just as a starter article to get you thinking !

Thanks, Callum