We build a property investment portfolio to build wealth, and ultimately gain financial freedom and get out of our 9-5 job.

How many properties do we need to retire modestly or comfortably?

The answer depends on what type of properties we buy, what sort of rents they get, ongoing expenses such as agent management fees, strata levies and loan repayments. Of course, how much we need also depends on what type of lifestyle we have and how many financial dependants we have.

According to the Association of Superannuation Funds of Australia (ASFA), Australians aged around 65 who own their own home and are in relatively good health, will need the following amount of money each week in retirement:

  • Single: $535 per week for a modest lifestyle, or $837 per week for a comfortable lifestyle
  • Couple: $774 per week for a modest lifestyle, or $1186 per week for a comfortable lifestyle

A typical rental yield for a freestanding house in Sydney is 2%-3% of the property value.
Therefore to achieve a rental income of $774 per week (couple with a modest lifestyle), you would need a $1.35m-$2m property portfolio consisting of one or more freestanding houses.
Remember though that you will need to pay for the ongoing property expenses and also income taxes. Income taxes on a $774 weekly income for a couple would be negligible, so we can potentially ignore those.

You can improve the rental yield by purchasing multiple low-priced houses (such as 3 x $300k houses which each tend to rent out for $300 per week). Apartment units might work to boost up the rental yield as well, but these tend to come with high strata levies, which essentially will negate the benefit.

You would want to have $0 loans on those properties. If you still have loans, you would want to look at the “equity” portion of your investment portfolio. Aim for an equity portion of $1m if your portfolio is made up of multiple low-cost $300k houses, and your loans are on Interest Only repayment basis.

Do note that this article was written when interest rates were around the 2%-3% mark (i.e. similar to or lower than the rental yield). The equation may change dramatically if interest rates are in the 7%-10% range like what we have seen in the distant past, and rental yields were much lower than the interest rates.

Also, the above assumes that you already own your home outright (no loan on the personal home).