How Many Investment Properties Do I Need to Retire?

A lot of Australians invest in property. According to the most recent Australian Taxation Office statistics, 15.2% of taxpayers are property investors.

01 October 2021

Investing in property isn’t the only way to build wealth, but it’s arguably one of the most effective, because you can use leverage to magnify your gains.

That’s why a lot of Australians invest in property. According to the most recent Australian Taxation Office statistics, 15.2% of taxpayers are property investors.

But those investors have portfolios of differing sizes. About 90% of investors own either one or two investment properties, while the rest own three or more.

That then begs the question – how many investment properties do you need to retire?

How much property income do you need to generate?

To answer that question, you first need to ask yourself what sort of annual income you want to live on when you’re retired.

Do you and your partner want your pre-tax annual income to be (in today’s money) $50,000, $100,000, $200,000 or some other number?

Next, you need to ask yourself how much of that income will come from superannuation and other investments.

Let’s say, for the sake of the exercise, that you and your partner:

  • Want to live on $150,000 per year
  • Expect to generate $90,000 per year from non-property investments

In that case, you’d need a property portfolio that would generate $60,000 per year in rents.

The value of your properties matters more than the number

So how many properties do you need to generate $60,000 in annual rents?

That’s not exactly the right question, because not all properties are created equal. After all, a $1 million house will generate much more rent than a $200,000 unit.

Instead, the question to ask is – how much do your investment properties need to be worth to generate $60,000 in rent?

To answer that question, you need to look at yields. (The yield is the return an asset provides, expressed as a percentage of the value of that asset.)

According to Domain’s latest quarterly rental report, the average yields across Australia are:

  • Houses = 3.69%
  • Units = 4.03%

Based on those numbers, to generate $60,000 in rents, you’d need to own investment properties to the value of:

  • Houses = $1.63 million
  • Units = $1.49 million

Of course, those are just averages, because yields vary from region to region and property to property. But they provide a basic guide.

Want to build a property portfolio? Vie Financial’s credit advisors can help. To begin the process, call us on 1300 400 843 or fill in this enquiry form.