Please comment on or criticise our retirement strategy

Hi all,

Firstly thanks for all the interesting posts that I’ve read here so far.

I’m relatively new to investing and pretty cautious and conservative at this stage. However, I feel that I now need to broaden my knowledge while I have the chance. So any comments or suggestions would be gratefully received.


Here’s our current situation:

We are a single income family, on a mid-level income. I have been retired for some years now (currently 63) and my wife intends to work for another seven and a half years until she reaches 65. We have no mortgages, loans or credit cards. We seem to be able to save $20k or more per year from her salary without too much trouble, which of course isn’t much. However, we have fairly modest tastes, and seem able to live within whatever our means are at the time.

Seven years is not a lot of time to make a big increase in our eventual retirement assets, but it’s more than enough time to blow a hole in them by making bad decisions, so I’m hoping to use that time to experiment a little and to gain more knowledge. By the time my wife’s super becomes available we hope to be clued up enough to know how to handle it more competently.


Some more detail:

Debts: Nil

Current Assets: House and land, contents, cars etc. Some cash savings and superannuation.

The house is within commuting distance of the city, so is creeping up in value. We don’t intend to sell (except possibly as a last resort if lack of cash or general senility forced us to move) so the value is probably not that relevant. However, it’s apparently now in the six to seven hundred thousand range.

The cash is split into several parcels and currently held in term deposits of between one and three years. As the deposits are in my name, and generate my only income, the tax on the interest is fairly minimal especially as I get the low income offset.

The superannuation is a ‘defined benefit’ which means that it’s calculated on length of time, contribution rates, etc. so it has not been hammered by the recent problems. After paying tax on the super lump sum, and adding it the other money, we should end up with what looks on paper like an adequate sum to retire with. However, it’s always debatable what actually does constitute ‘enough’. Some of you would probably think that it would be good enough, whilst others might be shaking their head and saying that it won’t last nearly as long as one might think. The true value of those future dollars will be less than today’s - maybe roughly three quarters of what they are now, by the time we’re both retired.


The reality seems to be that it will depend on how well we live within our means, how we get through the inevitable cycles of higher inflation, bad returns, etc over the following decades, and above all how good we are at managing that capital. Our eggs might sound numerous enough now, but they haven’t hatched yet, and we can’t be sure how fast we will be eating them. We might still end up in the queue at the government soup pot sooner than we hoped...

In theory, when I run online retirement calculators that factor in expected inflation figures and investment returns it looks adequate, but it depends on how optimistic or pessimistic the figures that you enter are. You can produce anything from a comfortably smug and cosy projection to a scary and paranoid meltdown scenario. So I figure that the more information we gain now the more flexible and effective our moves and responses might be. Somehow it all looks a bit too neat and conservative at the moment, and whilst that might be a good thing, I feel that it would be good to get a broader outlook, and learn more about a wider range of options, even if only to rule some of them out.

Like most older people we’ll need our investments to provide an income stream, and will have very little capacity to rebuild from any collapse in value. Our enthusiasm (and capability) for managing complex and/or risky strategies will doubtless decline too. So are there any suggestions about other areas that I should look more closely at please?

Thanks,

Chris

 

Hi Magpie

1'st I'd set myself up with some heavy reading with a bookshop/library. Then I'd make an appointment with a fee/hour financial advisor. Retirement investing can have complicated structures and require all your details.

Don't invest in anything you don't understand. It is better to take your time and set up a good plan than to rush in.

My older friends suggest that your fixed interest/bonds ratio equal your age. eg. 70 y/o - 70% bonds.

I think your idea of layering term deposits is interesting. Is it a lot of work?

Simple is often best. Try researching 'index funds'. Also, play with IFA.COM 's risk evaluator. It will give you a free portfolio that you may follow/ignore/modify.

InvesEd is a wonderful tool and there are others. Travis Morien and Bogleheads.

I've also heard of something called a 'reverse mortgage' if you get in trouble in later years.

Always spend less than you earn, and you will never get in trouble.



Cheers, Johny.

 

Retirement Strategy

Hi Magpie, not knowing your full financial position I can only comment on the issues at hand. Before you cash in your Defined Benefit super speak to someone. Defined Benefit Schemes today are generally associated with governemnt employees. They pay forever so if you reach 110 you will continue to receive a payment. The risk is associated with your ex-employer. Generally should you pass on your spouse would then continue to receive somewhere betweeen 60 - 70 percent of the benefit. Once she has passed away there is no benefit to your beneficiaries. You will need to talk with a specialist in this area before you act. Not knowing how much your partner earns and depending on her marginal tax rate you should consider salary sacrificing some if not all of your surplus, to super. By moving it to super it can be converted to a tax free income stream when she retires. This is dependant on what sort of superannuation scheme she is in. The other side of the coin is you could be saving on tax. Seek professional advice before you act.

 

Thanks very much for reading and replying Johny. I agree with your idea of reading, and have already ploughed through two or three of Noel Whittakers books, and am hoping to learn more here. I've looked around rather half-heartedly for a local adviser but, as you suggest, finding the right fee/hour person rather than somebody who is getting commissions is not proving so simple.

Ain't that the truth!

Bonds is one area where my ignorance is 100%, so thanks for that suggestion. I'll do some reading on them.

As far as I know it's called something like 'laddering' (unless I misunderstood what I read somewhere). It seems to be a way of staying in the same area without having all your eggs literally in the exact same basket. It probably doesn't necessarily maximise the profits much, but it does smooth out the bumps so that you have a relatively even performance. For me, that would mean I could live without the worry associated with things constantly bobbing up and down in value.

I don't think it's all that much work, but it would depend on how small you made your parcels and how often they came up for renewal. I've only got a handful at the moment, but I might split them again when they mature, depending on how the experiment pans out. It's been interesting, and quite enjoyable so far, to hold some cash at say 5.5% for a while and then grab an attractive term when the right 'special' comes along. So far, the range of rates offered above the norm are quite a bit better than I'd expected.

Thanks for your other suggestions too, I've made a note and will work through them.

Cheers,

Chris

 

Hi Intellikev,

Thanks very much for reading, and for your perceptive reply. I'll take a few minutes now and post some responses to your comments, together with some less vague details!

Cheers,

Chris

 

Hi again,

Apologies if any of this sounds too over the top with detail but I’m a stranger to public discussion of wealth issues, and it still feels kind of naffy to say “I’ve got this this and this” or “I want that, that and that...”. But I guess that’s what we’re here to talk about so I probably need to get over the shyness!

There seem to be two main issues involved:

How much have we got, and

What sort of people are we. Because what we’re are comfortable doing may vary hugely from the people down the road.



On the first point our assets are pretty much as follows:

Property:

The house we live in is on just under 2 hectares (about 4.5 acres). It’s a beautiful spot that has a rare combination of great views and privacy so we don’t want to sell, even though we could make a very good profit. We bought the block around 22 years ago and I built the house myself. It seems almost embarrassing to mention that it cost around $90,000 all up (including the land which was a princely $32,500). We’d need about $450,000 to buy the just the block now... As everybody always says, “If only we’d bought two of them....”!

It’s not currently sub-dividable, and we wouldn’t wish to do so anyway. At a rough guess the property would be worth something near a million in seven years when we’re both retired. So I guess a reverse mortgage or a straight out sale could be an option as the Reaper sneaks ever closer in later years. However, for now it’s not a McMansion just our much loved home.

Cash:

Currently a bit over a quarter of a million, mostly split into term deposits of varying amounts and time lengths. The plan is to save an additional $12,000 a year and get 6% or above. This will grow it to over half a million by R-day in 7.5 years. We’re already ahead of the 6% so that shouldn’t be a problem. The tax offset for my low income (which is only the interest on the deposits) means that I paid no tax last year, but will pay some this year. To be honest I don’t mind paying some tax, I enjoy the benefits of being a citizen. Over 65 there will also be an Age Offset. A couple aged over 65 can apparently earn around $50,000 before paying any tax, thanks to the offsets, and we can live on that. So if we do earn more, paying some tax wouldn’t be too hurtful. If we were that well off then we’d feel we ought to be still contributing. I’ve also already effectively avoided a great deal of tax by personally building my own home. The difference in costs were huge, so the mortgage was small and short-lived, and the need to earn a taxed income greatly reduced. So I’ve already spend quite a few years directly putting value into our property without needing to earn taxed money first. Paying some now won't kill me....will it??...



Superannuation:

It’s a State government deal, which was too good for them to continue offering, so they’ve since stopped taking new members. We’ll have been contributing for something like 30 years, so it should pay several hundred thousand. As little or no tax has ever been paid on it, it will apparently attract 15% tax when the lump sum is handed over + Medicare levy, making 16.5% - still leaving over half million for us. At least, this is what I’ve been told each time I’ve rung the tax dept to double check. As far as I know, there doesn’t seem to be any great advantage in rolling it over into anything as it will still attract tax (which seems fair enough too).


So that’s it. On paper it looks like we can retire with roughly a million in assets and another million+ in cash, which sounds pretty good to an old scruff like me. But, depending on who you read, that would be seen as plenty, barely adequate, or not enough - especially as a million in 7 years might be worth only 3/4 of that in today’s money.

 

Last bit...

Personal style:

This is where it gets a bit cloudy....

As Intellikev perceptively suggested, it would make good sense to salary sacrifice a decent chunk of my wife’s salary for the next 7 years. We don’t need all the income, and the tax saving would be pretty solid even if the fund didn’t perform too well and we had the most conservative cash plan. We were actually discussing that exact possibility last night, and our decision was not to do it.....

The reasons had absolutely nothing to doing with logic, profit, or even common sense! Independently, we both felt that it would be a bit of a rip-off. What a pair of wimps..... But we’ve had a good life in a great country and have reaped all the benefit of being Aussies. We already salary sacrifice the regular super contributions, so to pile on tens of extra thousands just because we could, seemed to cross some unseen personal line from prudence into being a touch too greedy. Interesting, I didn’t know I had one... but there it was!! 

However, I have no qualms about securing the best deals for us on the commercial market, so learning the investment ropes is all the go. The fall-back position is to continue to grow our savings by building the term deposits, and to possibly explore other cash style instruments. I don’t fancy being a landlord, and we’ve probably left the run a bit late for the IP route anyway. Shares look intriguing but too much work and angst when you get old and easily spooked and confused.


Our plans for retirement are fairly modest and don’t involve cruises or expensive trips (we both travelled a far bit when young). I’ve already bought the obligatory old fart’s sports car (A process apparently referred to by Bryce Courtney as the “Male MenoPorsche”....) and hardly used it. (Anybody want to buy a 6 year old Mazda RX8 with only 8,500k on the clock?? Goes like a rocket....when I remember to charge the battery....). Sitting on the verandah playing the guitar features large in my plans, while my wife dreams of cooking gourmet treats and making bead jewelry. Socialising and helping out with friends and in the local community is a goal for us both too. So it’s not really only about money as such. However, as Gloria Grahame said in the film The Big Heat - “I’ve been rich and I’ve been poor; believe me rich is better.”

Mostly we’d just like to be able to manage our own affairs, not have to call on a government pension unless absolutely necessary (perhaps a part pension if one of us survived into antiquity) and to be able to live a modestly cheerful life without getting too tight-arsed in our old age.

Any suggestions welcome.

Thanks,

Chris

 

The income derived from that salary sacrifice may, not be needed now, but who knows what is needed in the future? Maybe medical expenses, grandkids needs or even charitable gifts. It is better having wealth and not needing it than not having wealth and needing it.



Johny.

 

I guess that's true enough. But there's also the angle that it would change our other strategies, particularly the saving plan. So we would no longer be growing our savings as much under our own control, but would be relying on the unknown future performance of a regular super fund. On paper the tax angle does look attractive, but the loss of personal control and predictability doesn't.

Ultimately if we run out of money then we will have to rely on government pensions, medicare, etc. anyway. So it's more or less a case of choosing to take from the government now, or possibly take later. We have no grandchildren but, as you suggest, we'd prefer to be able to keep making gifts to charities and the like. However, government coffers are also used to fund a great many programs run by organisations with charitable status (including the one we currently prefer to donate to) so it's swings and roundabouts in a way. And we can still contribute by volunteering. I've done a bit of that in the past, and enjoyed it.

We'll have another look at it though. Perhaps we're just being lazy under the guise of imagining that it's some sort of 'Right Thing' to do... I must say, this whole retirement business is throwing up a whole lot of issues about what we really want to do with our retired life. Rather than just simple number crunching and finance decisions it's involving medical, social, legal and ethical stuff as well. More intriguing and challenging than I thought...

Cheers,

Chris

 

Chris, take it from me, you don't want to rely on a Govt pension. There is nothing worse than waiting in line at Centrelink for two hours, then, told to fill out another form and join another line.

The Australian Government may not have the money for pensions in the future. Thats why they invented Super. Don't get me wrong. I'm all for the control of my own money. Having Super just delays that control. Its price is lower tax. Its up to all of us to use our own initative. There will be a lot more retiree's on the market soon.



Johny.

 

Hi Chris

You are a very interesting person and you probably have enough to live on during retirement however, it seems to me that you need to see a professional.

3 words come to mind
Transition to retirement
http://www.cleardocs.com/clearlaw/superannuation/over-55

 

Johny, you’re so, so right there. My head hurts just thinking about it...

I guess we’re being a bit fuzzy in our thinking. We’ll ring the people who run the super fund that’s associated with my wife’s work and get some more details from them.

I had a taste of the dreaded Centrelink experience last year, and it was enough to put me off for life. Our son is severely intellectually disabled (hence the no grandchildren assertion) and I had to go through the whole business of enrolling him for a school age Disability pension when he turned 16. We’re not desperate for the pension at this stage, but if he was not enrolled for it when he became eligible it would have become tougher later, because intellectual disability is oddly difficult to ‘prove’ to their satisfaction. And it’s his life at stake not mine. So we had to prove that he was disabled now, in the past, and likely to be in the future. Naturally this involved dozens of forms with requirements that matched anything Kafka could dream up. I rang the help lines numerous times and got a bizarre range of conflicting advice.


Sample:

Them: “You’ll need to get his treating doctor to sign the forms regarding his disability”

Me: “He has no treating doctor, his disability is intellectual not physical. There are no blood tests or scans that we can submit, and no treatment that can cure him. He was assessed by a panel of professionals, none of whom were medical doctors. You could assess him yourself in five seconds by attempting to talk to him.”

Them: “ Could you just get his doctor to sign the forms?”....

Me:.Aaaargh!


Later...

Them: “Oh no - you don’t need to have a medical doctor to sign the forms if he’s intellectually disabled. Just get a report from his school. The Act allows for that.”

Me: “Great! His Ed Support Unit is staffed by aides and teachers. Who should write such a report and what exactly will you need it to say???

Them: “Um...... ooooooh.....it doesn't seem to say... Could you get his treating doctor to fill in the forms”

Me: “Aaaaaaaaaaaaaargh!!!”


Another day:

Them: “He needs a current assessment by a doctor”

Me: “ His assessment took a year of waiting and a panel of professionals. You can’t just get it redone on demand. He’s both severely autistic and conventionally ********. It took us 11 years to toilet train him, and six years before he could speak any words. He still can’t hold a conversation. The assessment was done about 12 years ago but his condition is lifelong and irreversible. It’s a very detailed assessment, plus we also have the functioning tests done by the school for eligibility for admission to the Unit a couple of years ago- will those do?

Them: “They need to be current. Really, they should be done after he has turned sixteen.” (I’m not making this next bit up) “But you should submit the forms a couple of weeks before he turns sixteen to allow for processing time”...

Me: “”Do you have a time travel machine I can borrow?”


Eventually I found a sympathetic paediatrician who took one look at my son and filled out all the pages of ********, snorting with disbelief as he did so.


My favourite moment was the form that required my son to give permission for me to act on his behalf. Naturally, the process would mean nothing to him so I signed it myself, in my own name - giving me permission to sign forms for him... Kafka would be proud.


There was more, but I’ll spare you the details. Suffice to say that when I first went in and started queuing and queuing, and working my way through the maze I was tempted to feel a bit irritated and just a little sorry for myself. But after an hour or two, the ones I felt really sorry for were the poor buggers who had to do it every week, and even more sorry for the poor devils sitting behind a desk dealing with it 5 days a week.



Then today I got a letter from the bank where we have a small passbook in his name where his part pension is paid. It was polite, friendly and helpful and pointed out that as he was going to turn 17 this year the Tax Dept would rate him as 17 from January 1st (no matter when his birthday is) and that the bank had to have his Tax File number or else withhold tax on the interest. Now this would only amount to a few cents, but if you don’t get these things sorted they come back to haunt you. The friendly impression of the letter was somewhat undermined by the fact that it was address to:

“Dear 08 9295 **** “ which is our phone number, rather than my son’s name.... Let’s hope the same data entry person at the bank types in some telephone numbers when they update his bank balance...


Now I vaguely remembered that one of the multiple forms at Centrelink involved generating a tax file number, but I don’t recall ever seeing it again. Or did I just imagine that??? So I rang the Tax Dept. The woman took all his details and left me on hold for a couple of minutes while she looked him up. Eventually she returned and said that she had accessed some information.

Oh good, says me, I don’t expect you to read it out, but can you just tell me whether he has one yet or not?

No, she said.

What! You can’t even confirm whether he has one or not, that’s bizarre. Why not?

You’re not a designated representative.

How do I change that?

You post us the original of his medical report (no copies allowed) along with...

He doesn’t have a medical report, he’s intellectually disabled. We went through all this with Centrelink, where I am his officially designated nominee,won’t that do? Or can I take all the documents that I do have into your office in Perth instead? I am his father and legal guardian.

Would you like me to make an appointment?

Yes please. (Back on hold....)

I can’t make an appointment for you.

Why not!

You’re not a designated representative.

AAAAAAAAARRRRGHHHHH!!!!



You’re dead right John. I never want to see the inside of Centrelink - or the Tax Office - ever again if I can help it. I’ll get my wife to ring the people who handle her employer’s super tomorrow!!

Cheers,

Chris

 

Hi Billv,

Thanks very much for the reply and the favourable assessment. A pattern is beginning to emerge here, so I think we do need to take your advice. One of my wife's colleagues recently went to a seminar given by somebody from their super fund. It didn't suit her but she passed on a bunch of printouts from the day to us. I have them on the desk next to me, in the "I Really Ought to Read Again Properly Sometime" pile....

The title is Transition to Retirement.

Thanks very much for the link too.

Cheers,

Chris

 

Chris

Google those 3 words and you'll find many websites with examples on the subject and ideas.

However, it seems to me that you need to sit down with a professional to discuss tax minimisation, your future needs and you'll also need to consider your son's situation in your plans, his needs, inheritance issues etc.

We can't rely on the government to look after us and especially when we leave behind dissable kids who could be dissadvantaged or used by others in our absence.

cheers

 

Bill,

You are spot on with your comments about not being able to rely on governments.

The government help we have received for our son over the years has been been patchy to say the least, yet we’re grateful to have had any help at all. It became apparently very early on that any occasional official assistance was being spread around so thinly that it was useless. Nobody ever got enough time with him to do anything but waste a few more dollars, and some of our time. Frustrating. So I ‘retired’ early and have been doing the job myself for the last 16 years. I home schooled him for most of the Pre-school years, but he was then able to go to the Ed Support Unit at the local High School, and they have been terrific, and the staff great. We can’t second guess his future too far down the track, but we are at least hopeful that he can get some part time work at what used to be called a ‘sheltered workshop’. He’s being doing work experience with one through the school and they say he works well once he’s been given a visual demo. The part pension that he gets is real however, and much appreciated, so we’re making sure that it gets used in the very best way for him.

In the meantime we’re working through setting up good support structure for him - which means involving real people who we know, and local community organisations, rather than relying on government systems that are throttled by rules and over-reliant on computers. The local group that I’ve done some volunteer driving for does a great job with old people, disabled, at risk youth, etc so there’s potential there for us to both give and receive assistance. One of the positives from the whole experience has been getting to know some wonderful people who work in those fields.


So, I guess there are two reasons that we’ve been slow off the mark with transitional tax minimising, even though it’s perfectly legal. One is that we are now getting some useful and welcome government help (his part pension, aide time at school, etc.) even though we are not exactly in desperate circumstances. The other is that I’ve learned that if you want a job done then you can’t beat doing it yourself. I designed and built our house myself, took on the job of devising ways of teaching my son, and generally manage our lives myself. So far it’s worked very well, so I’m probably over-reluctant to hand over control to any outside organisations (such as super funds or managed fund of any kind). I simply don’t trust them to do a good job.


Example - Getting information from the Tax Department last year:

I rang the help line to find out how my wife’s super would be taxed if we took the lump sum instead of rolling it into something. Mostly it has been untaxed to date. So it would be taxed on release, even if we did roll it over - fair enough too. The sticking point was finding out at what rate it would be taxed. The help line guy told me that something like the first couple of hundred thousand would be tax free, and the rest would be taxed at the top tax rate. This was not good news. So I rang again the next day and was given the same answer to my query. However, the fellow had quite a distinctive voice style and sounded as if he was the same guy from the day before. Plus, the figure he’d quoted me matched one I’d seen on another ATO table showing the maximum you could put IN without getting hit with full tax, not take OUT. So I asked him to double check, as I’d seen figures of just over a million at 15% quoted in articles. When he returned from double-checking he said “Oh, yes, you’re right - we get those tables mixed up sometimes”! Terrific! Yet another half trained phone/computer jockey reading poorly understood rules off a screen and getting it wrong.


On the face of it, my not having a business or paid job for many years looks like a negative. But in fact it’s had many positives. Apart from time spent with my son I’ve been able to put a great deal of value into our main asset, and major source of enjoyment, our home. We now have a unique hand built home that is exactly what we want, in lovely grounds, that would have cost a fortune if bought on the open market. If I’d worked a regular tax paying job the real cost of it (tax on salary, depreciation on work car, paying all that interest on a mortgage using taxed dollars, etc) would have been massive. I just got out the saw and hammer and built it. I don’t need to pay to get anything maintained or fixed either - all DIY, which I enjoy. Every day of my life I get up in the morning and do exactly what I choose to - and have done for decades. That’s priceless.

I looked into setting up a self managed super fund, but haven’t yet found a reason to do so. What advantage is paying ‘only’ 15% when - as an unemployed person - I currently pay zero for the first few thousand and 15% on anything after that? And get a low income Offset to improve it even more. I haven’t ever set out to minimise tax, but it seems to have worked out that way.

But you’re right, and I’m ranting on.... we’ll make an appointment to go and see one of the super fund consultants about possible transition strategies. At least we should know what the options are.

Thanks for everybody’s advice, and patience in reading all my waffle.

Cheers,

Chris

 

Retirement

Chris, it sounds as though you are happy with your lot in life and you are fairly conservative by nature. I believe the real issue is your son and how best he can be cared for in the future. I would suggest you contact a Solicitor and discuss the options available to meet his long term needs. I would give some consideration to a testamentary trust. I am not a Solicitor however one should be able to advise you of the long term benefits these trusts provide.

 

Thanks Intellikev, that sounds like a good idea.

At the start of this New Year I had three rough resolutions:

1. Get a fire proof safe and finally put all the important documents in one place for easy access. Previously they were spread around in a bulging filing cabinet, with some even hidden in a large book. In case of bush-fire it would have taken far too long to trawl through all the bumf and find the most important ones, including the paperwork for any investments. So I bought a safe last week, expecting to end up storing just one slim folder. Geez - how wrong that was! Amazing how much paperwork turns out to be important to keep safely.

2. Update our old wills and see a solicitor (never needed one before) about keeping them for us, plus discussing future options for our son. So I'll start by reading up on your suggestion. The more I know in advance the better value we'll get from a trip to a solicitor, an the less we'll be confused by jargon and legal terms. Thanks for that one.

3. Learn more about investing. Hence registering here. I am indeed very conservative with financial and general security issues - although not much that way in most other aspects of life.

I've put around 85% of our savings into Term Deposits while I get the hang of those but also kept a parcel on call to try out other areas once I can summon up the nerve, and the knowledge. I'm intrigued to know more about other areas - such as the stock market - but it's such a massive field that I feel that I'll need to try and specialise in one or two things and try and digest it in manageable chunks.

Thanks again for reading and responding. I'll try to be less verbose in future posts.

Cheers,

Chris

 

What about actually making real money instead of just pushing around what you have?

Hi Chris,
I know all the "educated" financial planner types are going to come down on me but you are missing your greatest opportunity. You are playing around with single digit returns and letting one of your largest assets sit idle.

You said earlier "If only I had bought 2 of them". Well why not do that now?
Assuming a property value of $700,000 and a servicing capacity capable of getting to 80% LVR then you have the capability to buy more than 2 mill in property. Median priced residential in major population centres only please.

If we assume the historical average of doubling every 7 years then by R day you will have another 4 mill in assets which you can draw down on in a similar way to a reverse mortgage while the portfolio continues to grow ensuring you never run out of money.

If you put 25% equity (20% deposit and 5% costs) into each deal and borrow 80% then a 10% growth rate means your return on equity invested is 40%. That's a real rate of return and in one of the safest asset classes. If it only grows by 5% (14 year doubling rate) a year then that is a 20% return.

If for some reason there is an anomoly in history that lasts for 7 years and the properties don't perform that well then you can just sell them and walk away provided they have gone up by at least enough to cover costs. A pretty safe bet over 7 years.

Investing doesn't have to be difficult. Observe history, do the maths and place your bets.

OK all you financial planner guys, fire away.