With the lowering of the age pension rate, Australians are finding it harder than ever to live a happy and full retirement. What’s worse is that the age pension rate will likely continue to lower, so people are looking for alternative ways to save for retirement. One way to live a happy retirement is to build a retirement nest egg through property investment.
So Why Property Investment?
Many Australians are realising that their superannuation alone will not get them to where they want to be in retirement, so they look to generate an additional means of income.
Property investment is largely considered one of the safest forms of investment – particularly for long-term investment strategies. In contrast to the volatility of the share market, property is a proven stable investment which provides a consistent return.
There are also tax benefits to investing in property as many expenses can be offset against the rental income.
If well chosen, not only will the value of your property increase over time, but your property will also generate regular monthly rental returns.
This is why building a property investment portfolio for retirement is becoming one of the most prominent forms of pension saving. If executed correctly, property investment can build financial comfort and security, allowing pensioners to enjoy a happy and healthy lifestyle in retirement.
Can It Work for Me?
Before diving head-first into property investment, it’s important to do your research and understand whether it is right for you. It’s not an easy task, and creating a successful strategy based on your financial situation and lifestyle will take some time.
It may be a good idea to speak to a property investment consultancy firm to receive valuable and educated information about the best practices to follow. Experienced consultants will be able to work with you to create a property investment strategy to help guide you through property investment so you can start to build your wealth.
How to Make the Right Choice
Investing in property does come with some quite substantial risks, such as a drop in the property market. That’s why it’s important not to rush into anything, take a step back and make sure it is right for you.
Here are some pointers to keep in mind when delving into property investment:
It Must Be Affordable to You
It’s not wise to invest every cent you have to your name directly into property investments as it can leave you exposed to potential financial hardships. You ideally want to ensure you have a line of credit available to deal with any unexpected financial emergencies. Make sure you have plenty of savings before entering the property market.
Don’t think that you need to rush into the property market all guns blazing. There’s no need to purchase properties quickly and you should not over-extend yourself. After purchasing your first investment property, wait a while and see how it goes before moving onto a second, and a third etc.
Take Your Time and Do Your Research
There is no reason to make any split-second decisions when it comes to property investment. Not only do you need to fully research the property itself, you also need to familiarise yourself with the location and find out about any expected changes that could affect your investment. There will always be an opportunity to make a good investment, so take your time and be completely sure you’re making the right choice.
Look for Growing Suburbs
Look for suburbs that show a strong projected population growth with a strong population base. The suburbs you are looking to invest in should have good infrastructure and should show signs of growing and improving to meet future expected growth.
Diversify Your Portfolio
A great way to spread your risk is by diversifying your portfolio to include different property types in different locations across Australia. Don’t only look at investing in houses; consider units, apartments and townhouses as well.
The market cycles are constantly changing, and by investing in a range of property markets you’re less likely to run the risk of all your property investments lowering at once, thus keeping you more financially stable.
Also consider investing in commercial property, as this can provide a great way of further diversifying your portfolio.
A good commercial property will typically provide a 4% higher net rental yield (i.e. a higher rental return) than a residential property. On the flip side, however, a residential property is likely to increase in value at around double the rate of a commercial property over a 10-year span. There are pros and cons to both residential and commercial property investments, and while spreading your risk is the safest investment strategy, commercial property isn’t always best suited to everyone. Carefully consider where you’re at in your investment journey and weigh up which option would be the best for you at that particular moment in time.
By understanding the best practices associated with property investment, your retirement nest egg will keep growing, leading to a financially sound retirement.