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How Many Investment Properties to Retire?

When considering how many investment properties to retire comfortably, we usually advise that one or two will normally do.


I’ve been a financial adviser for over fifteen years, eight of which have been specialising with property investors and their wealth creation plans, and I’ve now seen pretty much every property strategy there is, several times over.



What I’ve learned from this experience is that the most consistently successful property investment strategy is usually the one that just focuses on buying one or two blue-chip assets and holding them over the journey for as long as possible.


I know this sounds boring and slow and of course, I’ve seen several people be successful in adopting all sorts of alternative strategies, but it can be a more consistent, relatively low-risk strategy.



This can provide the investment success that comes with property investing without the time-consuming hassle of having an investment portfolio that is overinflated in the property area.


The reason for the success of this no fuss approach is due to many factors include compounding; opportunity to diversify; growing rental income; opportunity to reduce debt and the minimisation of buy/sell costs, including tax.


Let’s look at these factors all in isolation.

Investment Property

If you are reading this article, then I’m going to assume you like property as an investment and have or are thinking about buying investment property as part of your wealth creation strategy.


I like property too for many reasons, which we’ve explored in other pieces throughout the website. For the purpose of this blog though, let’s just focus on the assumption that you buy one property in line with the Melbourne median at April 2020 of $1,004,500.


We’ll assume you are age 35 and hold it until at least the age you retire, which today is generally age 65.


Most people have heard of compounding and Albert Einstein has reputedly said “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it”. In essence, compounding is growth upon growth and even if you only get the same rate of growth each year, if it is applied to a higher-valued asset, then the return is said to be compounded.


Looking at this example:

$1,004,500 x 4% growth p.a. for 30 years (until you reach 65), your property could be worth $3,257,992. Increase the compound growth rate to just 5% and this increases to $4,341,391.


With the growth rate of house prices in Melbourne, already having investment properties in your portfolio means you would have seen a huge growth in the value of your properties.



By simply holding a good quality asset over time, your rate of return is increased exponentially and this is one reason this strategy is often so successful.

Opportunity to Diversify

I’m sure you’ve heard of the phrase ‘don’t put all your eggs in one basket’, right? Well when it comes to property, it’s hard not to.


It’s such a large resource that it ties up a lot of capital and if the property is negatively geared, then cash flow is tied up too.


Given it is very difficult to avoid concentration risk when property investing, it is extremely important to diversify as best you can into other assets and by keeping your property purchases to a minimum, it is freeing you up to do just that.


Property is in the end just an asset class, like shares or cash for example, and depending on the year, all asset classes will have their time in the sun and be the best performer of the lot.


Holding a diversified portfolio therefore smooths your return over time and improves your investment flexibility to make your investments work for your ongoing needs. In effect, reducing the risk that you become a victim of being too heavily overweight in any one asset class

Growing Rental Income

The longer you hold your property, the greater amount of rent you will be able to charge.


Like with growth, your income return is essentially compounded as it increases exponentially when measured as a percentage of your original purchase price.


how many investment properties to retire


This growing income increases your cash flow in time for future investing, including debt reduction, and could become an optimal part of your retirement planning strategy to meet your retirement income needs.

Reduce Debt

One of the great things I see with clients who buy and hold quality property is that by the time they come to retire, their properties are often largely unencumbered.


It always pays to focus free cash flow on reducing home loan debt before investment, but once this is extinguished, offsetting investment debt increases free cashflow for other investing and your lifestyle.


The large majority of Australian’s I meet do not want debt in retirement and therefore having an unencumbered property or two by retirement, gives increased flexibility that one or more properties can in fact be held, to help meet retirement income needs.


Remember that the longer the property is held the more the compounding benefits apply, though taking a very good strategic look at whether holding is the right strategy around retirement is always the right thing to do, rather than to just assume.

Reduce Buy/Sell Costs Including Tax

One of the biggest factors to overcome to make property a successful wealth creation strategy is to achieve a good return above costs.


Property has such big upfront costs, when you factor in stamp duty, legal fees, bank fees etc. and it has big selling costs, when you factor in agent fees, marketing and then capital gains tax to finish it off.


Time and compound growth is the best way to achieve the desired investment outcome and minimising property turnover is paramount to this.


So many property investment strategies involve buying and selling property, but often this will not deliver the best long term outcome and if you value your own time in most of the strategies that involve a quick buy and sell, then the comparison in favor of simply buying and holding is even better.


As you can see, there are many considerations when looking at how your property investment portfolio should take shape and can benefit from a financial plan that is about your goals for retirement rather than just investing in as many properties as possible.

Yield Financial Planning Is Here To Help

Want to better understand your property investment plans and how many investment properties to retire? Contact us to arrange a free no-obligation meeting.



Important Note
Any information provided here is general advice only and does not consider your objectives, financial situation or needs. This information should not be taken as comprehensive and does not constitute legal or financial advice. You should seek legal, financial or other professional advice before relying on any content. Yield Financial Planning is not responsible to you or anyone else for any loss suffered in connection with the use of this information. Information is only current at the date initially published.

About Yield™ - Financial Planner Melbourne

Who we serve – We help time poor professionals and business owners who intuitively know they should be doing more to improve their financial position and are seeking an expert to guide them on financial planning strategies. Our clients want personalised financial planning advice and to feel empowered and confident that they can achieve a secure transition to retirement.

What we do – We gain a deep understanding of your current financial position and preferences, what you value and want to achieve. We then help you develop a highly personalised financial plan, to show you how to make your money work harder for you. Ongoing we regularly monitor and measure progress against your plan projections, to show you how you’re tracking and help you manage change to your advantage.

How we do it – We apply our proven expertise in investment markets (Shares & Property), Tax and Debt structuring, Retirement Planning, Risk management and Estate planning, to help you reorganise the way you use your money to achieve your desired outcomes.

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