PLANNING FOR YOUR FINANCIAL FUTURE
- Written by Melanie Toye, June 14, 2013
By investing in property
Building a lifestyle that can give you a weekly financial payout that is not relied upon the government would be ideal for most retirees. This is why planning for retirement should begin as early as possible in your life. To really plan for your future and your family's financial future.
One way is to build your cashflow through property investing. Here is an example. Say you put down a $20,000 deposit on a unit for $275,000. You borrow $255,000. You are lucky enough to be able to rent out your unit for more than the mortgage repayment and monthly expenses charged from body corporate etc. Say from that property you receive an extra $100 a month in profit after the mortgage and expenses are paid. This is a positive geared property. This does mean, you may be taxed on the income earned, but the extra money is now other income that you did not work for.
As you continue working and saving, you build up another $20,000 deposit. The equilty has risen in the first investment property by $20,000. You purchase a small but new low dwelling house to rent out. The equity in the first home is not used as a down payment for the second investment and continue to grow. The second house, you are able to rent for a higher amount due to the location and the dwelling. Again you have worked out that the rent covers the mortgage repayments and monthly expenses for maintenance etc. From the second property you are receiving an extra $250 a month in profit. Plus from the first investment, you now have a total of $350.
To be able to continue living your lifestyle when you leave work. You work out you want to have an income of $2,500 a week, totalling $130,000 a year. As this will cover a wage for you and your spouse. Together your wages are $110,000. However you want to work to a higher target to help with inflation rises, big expenses for family wedding gifts and annual holidays.
Now you have $350 a week and need an extra $2150 before you can quit your day job and live off the income earned from your property investments. This is why planning for the future gives you a great head start to your retirement, because buying properties and building your monthly income could take a good twenty to thirty years to achieve your target.
Now let's say after five years, you bought a third ivnestment. Another house, which is bigger and you can charge higher rent. You decide to use the second property equity of $40,000 and a further $25,000 saved as a deposit.This brings down your monthly repayments further and you receive $350 a month in positive cashflow from this one investment.
As you researching new properties to buy, you realise the time is right to sell your first investment. You sell and make a profit of $42,000. You then use this profit as a deposit for another investment property. You research the area and find a high end suburb that is selling a stunning townhouse. You buy it and make a profit of $800 a month. Your new cashflow per month is $1400. You are halfway to your goal of earning $2,500 in other income that is not sourced from a wage.
Property investing is one avenue you can take when planning for your financial future and even possibly early retirement, to live the life you want by not worying about what will happen when an income from work ends. Of course taking the steps to learn about investing, speaking with professionals, doing the research and checking the sums will all add to your success as an investor.
Please note the above is a scenario, the figures, repayments, rent etc is fictional to provide an example of how investing in property could be used for building your other income.
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