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Assessing IP growth for retirement plan

Discussion in 'Real Estate' started by Bonnie, 25th Mar, 2008.

  1. Bonnie

    Bonnie Member

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    Hello

    I have been crunching figures to work out what kind of gap we need to plug in our retirement plans but not sure how to treat our IP in the big scheme of things. It is currently worth $300,000 and we plan to sell it when we retire in about 15 year's time at which time it will be debt free. I'm just not sure how to work out the lump sum figure it will be worth given the number of variables, capital gains etc. Am sure one of the Ninfomaniacs on here will have a quick and dirty method to give me some sort of idea. The further treatment of funds after that is up in the air at the moment, am just after a lump sum figure. The house is an honest little renter in an average outer Brisbane suburb - we won't be keeping it due to its age by then and probable increased upkeep, worry etc.

    Thankyou in advance for any ideas - am stuck as to how to proceed.

    Regards

    Bonnie
     
  2. samaka

    samaka Well-Known Member

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    Huh...?

    What do you expect the property to be worth and how much did you purchase it for?
     
  3. Bonnie

    Bonnie Member

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    Hi Samaka

    As in 'n-INFO-maniacs' who are everywhere in this forum!

    That's just what I am asking - what is an acceptable average rate of growth for an average IP.....can't find that kind of figure anywhere and am just after a ball park or what others may have used to work out their own future needs.

    Regards

    Bonnie
     
  4. crc_error

    crc_error The Rule of 72

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    what suburb is it in?
     
  5. Bonnie

    Bonnie Member

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    Hi crc

    It's at Rothwell on Brisbane's northside.

    (I really enjoy your posts by the way.)

    Regards

    Bonnie
     
  6. crc_error

    crc_error The Rule of 72

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    Hi Bonnie,

    It looks like the last 10 years haven't produced any growth as domain lists the long term growth at -1.5%

    http://www.domain.com.au/public/suburbprofile.aspx?searchTerm=Rothwell+&mode=research#mapanchor

    RPData seems to show units doubled in the last 10 years, but is this due to new developments? As the annual price seems to jump in 2004 unnaturally?

    House Prices Australia from myRPData - Australian Property Prices

    But as a general rule, property will double every 10-12 years. Sometimes quicker depending on the suburb,

    Glad you like my posts :) Hope they help!
     
  7. crc_error

    crc_error The Rule of 72

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    sorry, for some reason I assumed you had a unit.. house growth has been good, averaging at 11% PA.. so divide 11 into 72, and that will tell you how many years to double your investment.
     
  8. Bonnie

    Bonnie Member

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    CRC

    Thankyou CRC for sourcing that - exactly what I was after - will go and have a closer look.

    Cheers

    Bonnie
     
  9. crc_error

    crc_error The Rule of 72

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    no worries, except I wouldn't count on doubling every 6.5 years.. thats a excellent return.. I would use 6-8% PA for projections not 11%.. anything above your projection then becomes a bonus.
     
  10. Jacque

    Jacque Team InvestEd

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    Hi Bonnie

    I'm with crc on the projected forecast of 6-8% as well, but you need to also factor in the fact that Brisbane has gone through previous cycles of very flat growth followed by a couple of years of boom period (as it's doing now, from what I'm hearing) so growth definitely isn't consistent. However, as a general guide, allowing 6% conservatively would be ok.

    It's interesting that you believe in 15 yrs the upkeep will be too costly. Is it a Qlder or post war property? I have older homes in Brissy and, though you need to keep an eye on maintenance, I wouldn't agree that it's necessarily going to be more costly in 15yrs. After all, some of those homes, particularly in the older suburbs closer to the city centre, have been standing for almost 100yrs and, providing they're maintained, will still look good for a longer time yet.

    As Australians we consider 100yrs ancient for a house, yet our European counterparts live in homes much older than this and they're still standing strong :) My UK based girlfriend bought a 1930's "new" home in her village and was told it was one of the youngest homes in the area.

    Keep the paint up to it every 7-8 yrs, ensure maintenance issues are attended to before they become bigger problems, carry out annual pest inspections and inspect the house when your PM does, so that you're aware of possible problems. This way, you can stay on top of issues, they don't need to become overwhelming and you may just find yourself with a better property because of the attention in 15yrs.

    Best of luck with your projections :) Oh, and don't forget to factor in increasing rents and other costs, if they apply, such as land tax.
     
  11. samaka

    samaka Well-Known Member

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    Ah ok .... thought you had meant nymphomaniacs :p
     
  12. AsxBroker

    AsxBroker Well-Known Member

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    Hi Bonnie,

    Why don't you buy the property in a super fund?
    You'll be taxed less on the rental income and then when you retire you can either sell it CGT free or keep it and the rental income will be tax free...

    Cheers,

    Dan

    PS Before making an investment decision speak to an FPA registered Financial Planner.
     
  13. Bonnie

    Bonnie Member

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    Hello

    Thank you all for your ideas - some things to chew over. I think the 6-8% is a reasonable figure on which to base future projections, thanks crc. Jacque, it's true what you say re redeeming features of older houses, something to think about. Dan, have been mulling the whole SMSF over and over - at that Catch-22 where I don't feel we really have enough on paper to start one but by getting started now would save CGT and a number of other headaches down the track - will do some homework.

    Thankyou again for your ideas - always more than one way to look at things.

    Cheers

    Bonnie