Creating a passive income

Work it out like this
1 estimate the yield of the types of property you are after
2. reduce this by about 1% for costs
3. Divide the desired income by the figure in 2

In this case assuming you get a 5% yield, take this as 4% after costs
$250,000 divided by 4% =$6,250,000

So you will need $6,250,000 worth of unencumbered property to get an income of $250,000 per year (before tax).

Now work out the average value of the property you are looking to get. lets say $500,000 properties
$6,250,000 divided by 500,000 = 12.5

So you will need around 13 properties valued at $500,000 (in todays dollars) all fully paid off to retire.

Of this may be 26 properties with 50% LVR loans perhaps.

I think the important thing is to get an overarching strategy for your portfolio. You have a strong income and some equity to begin but you don’t want to buy overpriced properties that won’t grow in value and rental income. You should spend some time doing a bit of work on the bigger picture so you have a very clear picture of what kind of properties will work together to achieve your income goal. Negative and positive gearing are just the cashflow and tax results of buying certain kinds of properties in certain areas. In addition to these you have more diverse strategies including development, different markets to buy in etc etc. I do a strategy session with any new clients so they understand why they are doing things firstly, then visualise the outcome and then reverse engineer the portfolio to reflect that. Momentum is the most important thing once you begin so you need a good sense of what you are doing, why you are doing it, how to get it done and have a good team around you to help when things get tough. All the best with it!