The big question in the minds of all Australians today is whether they will have enough money to live on in their retirement years. This is an important question as life expectancy increases. The average age of the population continues to rise and inflation threatens the real value of pensions that will be available. Couples as young as their late 20s and early 30s are being encouraged to think seriously and act on making property investment plans right now.
Some younger couples are planning strategies that see them being able to retire as young as 50 years old, living off the income generated by up to eight properties that make up their property investment portfolio. Young couples have been planning to make an acquisition of units in various parts of the country on a bi-annual basis. Some were able to take advantage of the financial crisis from 2007 to 2010 to find a good choice of property investment opportunities.
The key factor to successful property investment purchase has been to target areas where higher than average growth is expected. The increased value in the equity of the property can then be used to fund further purchases. The property investment portfolio plan is not without its risks, particularly in the early years. Young people planning for their retirement run the risk of a stagnant or falling property values, at a time when their debt exposure could be at its greatest. Another risk is if the investor or their partner loses their job and subsequent income. The good news is that the job market in Australia is extremely positive for employees, so the chances of increasing your salary have never been higher. Additionally, property values are rising, due in no small part to the shortage of new properties coming onto the market.
The Westpac ASFA Retirement standard reports that a retired couple today need to earn $50,700 to live in comfort and $27,000 to survive at a basic level per annum. So the question is, can a well thought out property investment plan deliver enough income security to be able to live in a relaxed way in retirement?
It is important to list all the elements that will need to be taken into account when planning your property investment strategy. First, you need to calculate the available equity from your family home that can be used to start your property investment portfolio. Next, you should be careful in accepting tenants, as you don't want problems caused by the rent not being paid on time. Calculate that on top of the mortgage payments that you will need to make on each property, and you will need to allow between $100 and $150 on each property per week for various maintenance costs.
Property investment specialists advise diversification. This can be achieved by having a balanced portfolio of property investments as well as stock and bonds. When purchasing property it is recommended to have a property investment portfolio across the country, not just in one neighbourhood. This will reduce the risk of crisis caused by acts of God. As you approach retirement and your children have left home, the greatest opportunity to invest in property comes by selling the family home and moving to a smaller one or a unit and using the equity for more purchases.
Private Equity Real Estate