hi all,
i have two houses. One my principle residence and 2 an investment one. i am trying to work out how much they will be worth in 32 years. i am working on retirement income to see if i need to add to my super or not. Is their a formula i can work on to get this result?
property 1 $420,000 now (2005)
property 2 $230,000 now (negative geared investment)
any help would be greatly appreciated
Thank you
clueless[blink]OMG what a great nick….
The short answer is that they will be worth what the market is prepared to pay for them at that time..
The longer answer is that you need to determine what sort of expected capital growth you could expect for those particular properties, and that will depend on many things!
Can you clarify how these properties are going to determine your retirement income?
The rental PROPERTY will generate income, but the PPOR will not…( ??)Anyway, for example, if you were to get a 5% capital growth on each property, then the PPOR starting at $420,000 will be $2,001,275 and the rental property starting at $230,000 will be $1,095,936 after 32 years…
But by then, everyone will be a millionaire, so it will all be relative.
kp
Hi Clueless,
I think everyone would like to know what their property would be worth in 32 years time – the mind boggles !
7th year $1.3 mill
14th year $2.6 mill etc etc etc
I’ll be looking at my teeth on the bedside by that time however back to your question – if you look at property in the UK (property ownership has been going on for a much longer time than in Australia) then you would have to say that property doubles in value every 7 to 10 years. That is what history would tells us however pigs might fly !
But seriously, I personally feel that economies around the world are changing in this respect and we would all like to have a crystal ball so your question is really impossible to answer.
Something else you should be asking is what income do I want in 32 years ?? Super is great – if you can afford to add a bit extra each pay (do it by salary sacrifice to get the tax advantage) and it will all help. It is good to diversify your investments anyway.
It is great to have goals and if I were you I would be thinking about and working towards finding your next IP.
Hope I have been of some small assistance.MIKALA
hi mikala
Getting ready to invest in property again. thanks for advice
cluelesskp
how would i convert that back to real time money not inflated one? what is it worth in todays dollars? also why 5% growth? Is this the standard growth rate i should expect for property over the years???
Please help
clueless (glad u like my nik-unfortunately it’s true)Sorry for being so flippant.
What I was trying to say was that you really cannot tell for sure what it will be worth in 32 yrs time…..so you have to guess, using as much relevant information as possible.
For example, historical growth for that sort of property in that particular area, any changes in the area that might impact on that growth rate, ( both upward as well as downward)etc, etc.
That capital growth rate of 5% is not guaranteed or a standard rate, but gives you an idea of what the value will be at that particular rate. Its just an example.
If you recall in your original post you said you needed to work out what your properties would be worth after 32 years…..well unless you attribute a growth rate at xx percentage, you can’t work out what they will be worth !
But you can’t eat capital growth or equity, so its probably more important you focus on what income you require to retire on ( and I don’t mean retire when you are 64!!)
If you set the amount of cashflow required to retire on, and then work out how you can build up assets and capital to provide that income, you will probably find that you can retire a lot sooner ( 32 yrs ?????….anything could happen in that time )
kp
Hi CLueless
Property returns over the last 30 years averaged 10% compunding and kept pace well ahead of inflation. Not sure but I think inflation would have averaged somehwere around 5% over the last 30 years, it is currently in the 3’s and has been for around 10 years.
Rent returns are at a low because we have just come out of a very fast boom. Residential yields just before the boom in Sydney were around 6%.
So, all you can do is go off historical information and take a wild guess. At the end of the day it’s all crystal ball gazing, but I would sleep better at nights knowing I had 2 investment properties rather than non
.Yes Home Loans Pty Ltd
Is your mortgage advisor accredited with the “Non Bank Lender of the Year?”
(Money Magazine 2005).Hi cluless
Mikala and KP have stipulated the importance of determining the income you will require on retirement as the critical factor. It is more effective working towards a target or goal than to try and guess what your assets will be worth in the future. That requires assumptions based on past performance which is no indication of future performance and therefore is totally unpredictable. I’ll bet you’ve heard that one before.
Anyway, it is a good idea to develop a plan with an appropriate advisor and then work towards it. Whatever the properties are worth in future will then be a bonus.
Cheers
pr
geez mate how longs a piece of string!! Who would have guessed that the government would come outwith a first home owners grant in combination with a low interestrate. There are soooooooooo many factors that can affect realestate and finance as a whole. If it was easy then everyone would be rich…
Extract from Paul Clitheroe’s, “Make your fortune by 40″….
A very handy rule of thumb to consider when it comes to financial independence is to multiply your desired annual income at the age you want to be independent by the multiple below:
Age_____Multiple
40______25
55______17
60______15
65______13…if at age 40 you want to have an investment income of $200,000 a year, for the rest of you life, linked to inflation, then you will need $200,000 multiplied by 25, or $5 million.
Hope this helps.
.
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