Sylvia and I have now got a net worth of $700,000. This year alone, my net worth increased over $250,000.
My current planning and action was all done in order to create and maintain net worth.
However, while not letting my eye off the ball of continuously increasing net worth, I need to start creating a similar mental model of how that net worth will translate into monthly income at retirement.
Social Security - Peter $2500 a month
Social Security - Sylvia $1500 a month
Lets assume I could create ten investment properties that were paid off by the time I retire at 67.
How will I create ten investment properties
Eden2 - $200,000K US
Grimlinghauserstraase - $500,000K US
$700,000k
75% leverage = $2.8 million in real estate
= About $10,000 in cashflow a month
The real gain is in capital gains. Which means timing of when to sell and buy, if you assume the market is cyclic.
It is 2017 now. I am 67 in 2037. That's twenty years
So properties have to be paid off in less than a 30 year mortgage.
A large chunk of the benefit of owning investment property is the fact that the interest is tax deductible. That acts as a disincentive to pay them off. But, if the goal is to have them paid off and creating cash flow, I would have to pay off significant amounts of additional principal, early in the
So, is it better to pay them off, or use additional capital to buy more properties?
The ways you make money in investment property are:
1. Capital gains
2. Depreciation deduction
3. Mortgage interest is a business cost.
Buying more properties::
1. Increases opportunity for capital appreciation
2. Increases depreciation to offset income
3. Increases cash flow
4. Creates additional complexity and cost
5. Increases potential risk
Paying down existing properties:
1. Increases equity in the property being paid off
2. Decreases availability of free capital (increases cash flow risk)
3. Decreases overall risk by having decreasing leverage.
Net worth impact is the same for additional strategy.
What is my free cash flow income target at 67.
To maximise our social security benefits we should not start receiving social security until age 67.
Target retirement income is $10,000 a month for 20 years, then assume some kind of managed care for 10 years.
I need concrete income calculations and draw down calculations that answer some of the following questions.
- How much will my 401 K type savings last.
Social security makes up 90% of their income from 35 percent of retirees
Social security makes up 50% of the income of 60 percent of retirees
Monitor the gains I make from my 401K to see how much I would make trading mutual funds in my 401K.
What is the balance I would need in my 401k to be able to make income from regular trading and from ownership of dividend and capital gains distributions.
If I had $1,000,000 in my 401K, and was trading $100,000 (10% of the total balance) in each trade:
- A 3% gain would be $3000 in profit. After tax that would be $2500
It's realistic that I could make 2-3 3% trades each month. That would be between $5000 and $10,000 per month, or $3750 and $7500 after tax.
The target is to create a clear plan for $10,000 after tax income per month
See which funds can be used to provide monthly income.
