Do you know what your end game is? Or rather what is your exit strategy? You should really know what this is even before you start investing, but many don’t. You would be surprised (or maybe not so surprised) to discover that a lot of investors not only Don’t have an exit strategy but they also don’t have a clear plan of what they are doing and why.
Do you know what your end game is?
Your end game should include all the relevant details such as when you want to retire, how much passive income you will need each year to retire on, and where that income is going to come from (be it shares, property or superannuation).
Ultimately we all want to retire comfortably and with this in mind we need a clear plan of how we are going to do that.
If we set aside shares and superannuation for the moment and just think about property. How much property would you need to give you enough income to retire on?
First work out how much money you would like to live off in retirement. Let’s say $100,000 per year. Ok, so if the average return on an investment property is around 5%, that means if you had $1 million worth of property with no debt you would receive $50,000 per year in rent. To receive a rental income of $100,000 per year you would need $2 million dollars worth of properties debt free.
But don’t forget that this doesn’t include all the property expenses, rates, repairs, management fees, tax etc. Factoring in all these details, your property portfolio will need to be worth more than $2 million.
While the figures may seem daunting property appreciates over time so amassing a $2 million portfolio may not be so overwhelming if you estimate that the value of your properties will most likely double or triple in value from now to when you retire.
Starting with the end in mind is a tried and true method. Those that are clear on their end game work harder to achieve it and are more focused. They don’t get distracted along the way and are more likely to succeed. We all want to succeed right?
Take some time today to figure out your end game. Write down what age you want to retire and how much money you want to retire with and by what means that money is going to be made. Ask yourself how much money you will need every year to live the lifestyle you want and set a clear plan today to get you there.
Until next time…