When building a property portfolio, the majority of investors focus solely on residential property. The key issue with this is as you near retirement, the income is low – with residential houses in good quality areas typically yielding between 3% – 4% gross. Once you factor in annual running costs and a sinking fund for capital improvements, net incomes typically settle around 2%. Explained differently, if you had a residential property portfolio of $2m, the income after annual expenses would be approximately $40,000.
There are strategies to get higher income from residential property such as: regional unit blocks, duplexes, mining towns, rooming houses, student accommodation and disability accommodation. Each carries different yields & higher risk. Additionally, these strategies result in a meaningful time cost to the investor. For most high income, time poor investors these strategies are not suitable.
We have partnered with TSF funds management to resolve this issue for our clients with the “PPA income fund”. Target net income within this fund is between 5.5% – 7.5%, in a low risk environment, with minimal time cost. Maximum gearing within the fund is 40% and the focus is on quality commercial & industrial property with quality long term tenants. Importantly we target tenants that still pay rent in all economic conditions – such as government tenants, medical centres, hospitals, shopping centres or blue chip key supply chain businesses.
The sole objective of this fund is to balance out the low income from quality residential property and achieve a blended net yield across the property portfolio of 5%. This fund is exclusively for our clients and only available to those that meet the sophisticated investor definition, as defined by the Corporations Act.