How Many Investment Properties Should You Have To Retire?

There was an absolutely fantastic article in one of the mainstream center-right publications about retirement planning. Reading it may be helpful, but that’s not necessary to bask in its infinite wisdom.

The core question it addressed was: how many investment properties should you have to ensure a comfortable retirement? How many houses should you buy and then rent out, so that when you finish your job you can ensure that you have enough income for a good standard of living, and still be able to pass on a reasonable sum to your children?

They consulted with economists and investors. They got the one true answer. Are you ready?

The correct number of properties you should own is:

Four.

So, everyone who wants to retire comfortably should own at least four houses.

So… the people living in these houses and paying rent... do they get to retire? Ever? Or are they just sending you a large percentage of their employment income for the rest of their lives until they drop dead from exhaustion? All from these little title deeds.

Maybe renting is a transitional thing, and they’re just doing it while they can save up enough money to buy a house of their own. But then, when they want to retire, they’re going to have to do the same thing and get four investment properties of their own. So for everyone who rents to retire comfortably, they’re going to have to eventually take a percentage of the incomes of at least four other people. The only way everyone can do this is for the population to increase fourfold per generation.

Yes, that article was utterly absurd. And there are many other forms of investment that are feasible to ensure you’re able to retire with an acceptable standard of living. But when you think about it, the entire concept of having enough investments that you can retire has the same problem.

At a fundamental level, having those sources of income means that there is a large transfer of wealth from the people who are actually creating value in the world, to the people who are not. Since everyone naturally wants to be in the latter group, all of our social institutions will be oriented towards trying to move from the former to the latter. They can only skim a certain amount from the people who actually do work, so the group receiving the wealth can only be a fraction of the size.

The more people are able to retire, and the earlier and more comfortably they do it, the larger the burden is going to be on everyone else. The creation of wealth overall is not a zero sum game, but we have to be aware of the burden of labour that our lifestyle has regardless of how much wealth we create. Somebody has to actually make all those goods and provide all those services.

Checkin

Version: 1

Written: 2019-12-31

Written on: Not sure

Cognitive capacity: Excellent

"You're speaking as if the Australian economy is made of people selling each other houses at ever-increasing prices, with a thin wrapper of immigrants and young people doing the actual work at the edge.

"Yes. That is exactly what I'm saying.