“The reality is, quite often one property is enough to generate a reasonably sized retirement nest egg” according to Jerry Collova, Managing Director of PEB Group.

“While it won’t make you crazy rich, if managed correctly one property will allow you to enjoy life's little luxuries when you finally have the time to enjoy them.”

How to Retire Comfortably with Just One Investment Property

The table below, taken from ASIC’s MoneySmart website, gives you a rough idea of how much money you need to support a modest or comfortable retirement. This table applies for people retiring at age 65, who will live to an average life expectancy of about 85.

 ASFA Retirement Standard

 Annual living costs

 Weekly living costs

 Couple - modest

 $34,051

 $653

 Couple - Comfortable

 $58,784

 $1,127

 Single - Modest

 $23,662

 $454

 Single - Comfortable

 $42,861

 $822

Source: ASFA Retirement Standard, June Quarter 2015.

Taken from The Association of Super Funds of Australia (ASFA) ‘Developments in the level and distribution of retirement savings’ (2011), it notes that the average retirement payout (aged 60-64) was around $112,000 for woman and $198,000 for men. These are worrying figures and highlights that people do not think out that far into the future and plan for their retirement.

“Our typical property investors are in their 40’s and 50’s; they have between $100k - $200k in super, and roughly another 20 years left of work.”

“When they retire their combined super will be around $300k, which will give them about 9 years of living at a modest income of $35,000  or 5 years on a comfortable income”

“If we assume they will live 20 years in retirement that leaves a shortfall of between $300K to $900K depending on their retirement standard.”

"If they buy a cash flow positive or neutral investment property now, for say $350k - $450k, in 20 to 30 years-time that property may have doubled in value, it may even have tripled.”

“They would then sell that property when their super funds are getting low, and then gain enough from the sale of the property to cover the shortfall and continue to live comfortably,” Mr Collova said.

Because the property over the long term has been cash flow positive or neutral, it’s hasn’t cost them much to hold so hopefully there has been no financial stress or hassle in owning it.

“It’s a smart way to do it, but as we always stress it depends on the individual client, their goals and their risk profile,” Mr Collova said.

More than One Property?

Whether you should invest in more than one property also depends on your individual circumstances, especially your risk profile.

 “For a typical client on an average $60,000 a year income it still depends on their age, whether both partners are working, what level of risk they are comfortable with and other factors," Mr Collova said.

“Generally investing in one to two properties is all we advise, once you go over that all sorts of other factors come into play.”

“Managing 10 or more investment properties is a lot of work; in fact it becomes a fulltime job.”

“And many people simply don’t need or want a situation that requires so much extra work and interferes with their lifestyle.”

“Equally important is that your risk factor increase dramatically. You are essentially relying on capital growth to drive your investments,” Mr Collova said.

“If the market goes flat or experiences a downturn, as we are experiencing now, then you’ll have a problem unless you have some other source of cash flow to support these investments.”

“It’s a very high risk strategy and we don’t recommend it unless you are prepared to do it as a full time occupation and you also have significant financial resources behind you,” Mr Collova said.

For most of our clients though, one property is enough.

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*This article is for general information purposes only. It is not intended as financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified and registered financial or investment adviser.

PEB Group is a complete property advisory service for Perth families. Offices are located in Inglewood and Willetton, Perth, Western Australia and offer service in - Financial Planning · Finance Broking · Property Management · Property Sales · Property Investment · Development

PEB Real Estate - Licensee PEB Real Estate Pty Ltd. Trading as PEB Real Estate ABN 33 604 199 617. Triennial Number RA70508

PEB Financial Planning - Howarth (WA) Pty Ltd ARN 433328 trading as PEB Financial Planning is a Corporate Authorised Representative of NEO Financial Solutions Pty Ltd. AFSL 385845 | ABN 64 141 607 098

Fungroup Enterprise Pty Ltd | ABN 50 104 943 412 | Australian Credit Licence 389510 | trading as PEB Finance | ABN 50 104 943 142 | Australian Credit Licence 389510