Should I Use Property to Fund My Retirement?
An astounding number of Aussies are moving away from relying on traditional means of funding their retirement in favour of establishing property portfolios. First Financial is here to help our clients decide what is right for them when planning the long term goals for their wealth management into retirement years.
Property Investment is definitely not for everybody! It is a fantastic way to fund your retirement, and keeps your days busy with opportunities to monitor, property managers to deal with and all the ups and downs of the property market.
Planning before jumping in is absolutely integral. The difference between an ill-conceived portfolio and a strategic one will determine your financial stability for decades to come.
Some of the main factors you need to consider before deciding if investing in property as a means of retirement is right for you are:
Can you live with a non-liquid asset?
Property investments, while stable, are not a liquid asset. Someone investing in stocks can cash out in microseconds, while in the case of property you will need to advertise and market the properties, deal with property brokers and it can take many months before there will be cash deposited in your account.
Can you make do in a crisis? Do you have the appropriate safety nets in place while you’re waiting to sell? Thinking ahead and planning for the worse, but hoping for the best, will mean you don’t need to stress about liquidating your portfolio.
You can’t just rely on a couple of properties to retire on.
A good portfolio for a retiree will consist of five or more unencumbered properties. One $500,000 property might bring in $20,000 of rent a year so it’s unrealistic to maintain a comfortable retirement for yourself on only one or two.
A good advisor will put together a range of options in different areas, that pad out your assets so that if one property ends up taking a loss, the others will stabilise your income. Strategy here is integral and you should seek multiple sources of advice before committing to a decision.
Can you find reliable, low-maintenance properties?
Unless you want to spend your post-work years fielding calls from property managers and chasing up contractor quotes to fix things, it’s incredibly important to curate a portfolio of “set and forget” properties. High quality and sturdy properties will give you the peace of mind to enter into this venture for the long term.
Every property will come with a range of potential issues, and you never know when a strike of bad luck might occur but thoughtful consideration of the quality of properties will tip the scales in your favour.
Location, Location, and that other thing that starts with an L...
Cliche or not- it cannot be stated enough! The surrounding facilities, amenities and neighbourhood with ensure your properties are always rented and have a high quality tenant. Proximity to good shops, schools, public transport and medical facilities will secure the profitability of your portfolio so be very picky when it comes to your area to invest in.
At First Financial we believe that your retirement should be a pleasure, not a hardship. Failing to plan is planning to fail so read more about our Retirement Planning services here and as always, we welcome you to contact your us directly on 03 9258 6800.