Do not rely on su­per for re­tire­ment

The Riverine Herald - Local Real Estate - - LOCALREALESTATE.COM.AU -

The great Aus­tralian dream of own­ing a home is an in­ad­e­quate one in times of ris­ing house prices, in­ter­est rates and costs of liv­ing. Or­di­nary Aus­tralians on av­er­age in­comes must con­sider own­ing more than one prop­erty if they are to fund their re­tire­ment and ‘live the dream’, ac­cord­ing The In­vestors Club, prop­erty in­vest­ment spe­cial­ists. Spokesper­son Wendy Priestly said su­per­an­nu­a­tion was of­ten not enough. ‘‘With share mar­kets re­spon­si­ble for poorly per­form­ing su­per funds since 2008, Aus­tralians need to de­velop the skills and know-how to in­vest in al­ter­na­tive chan­nels to sup­port their re­tire­ment,’’ she said. Ms Priestly said the widely-held be­lief peo­ple must have a high in­come to in­vest in prop­erty was a mis­con­cep­tion. There are a num­ber of rea­sons why most in­vestors do not buy be­yond one in­vest­ment prop­erty. ‘‘ABS fig­ures show that 50 per cent of in­vestors are post­code buy­ers. Buy­ing in the area where your own home is ties you to the lo­cal prop­erty cy­cle — a poor strat­egy.’’ An­other poor strat­egy is in­vest­ing in a bar­gain. The In­vestors Club’s top 12 tips for build­ing a suc­cess­ful prop­erty port­fo­lio:

Prop­erty in­vest­ing is es­sen­tially a busi­ness, so de­velop a busi­ness mind. Avoid in­vest­ing in prop­er­ties you would want to buy for your­self; buy for ten­ants.

Do not be­gin in­vest­ing un­til you un­der­stand the num­bers.

Diver­sify across len­ders to in­crease your bor­row­ing ca­pac­ity. Your goal is to own a large as­set base and your lender may not have the best in­vest­ment loan at the time.

Un­der­stand what the hold­ing costs are (out­go­ings mi­nus in­com­ings) and make sure they are man­age­able. Know how you will fund the costs.

In­vest in lo­ca­tions with high pop­u­la­tion growth, high em­ploy­ment, and high mid-to­long term cap­i­tal growth.

The area must have a sound long-term rental his­tory.

Choose prop­er­ties close to im­por­tant ameni­ties such as schools and pub­lic trans­port.

Choose new or ren­o­vated prop­er­ties to max­imise de­pre­ci­a­tion, tax sav­ings and rental de­mand.

It is best if the prop­er­ties are high-qual­ity in de­sign, ma­te­ri­als and con­struc­tion, for min­i­mal main­te­nance.

Buy and hold for a min­i­mum of seven to 10 years. Few peo­ple grow wealthy by buy­ing and sell­ing con­tin­u­ously.

Diver­sify your in­vest­ments in cap­i­tal cities across Aus­tralia, to pro­tect your port­fo­lio from mar­kets with pro­longed flat pe­ri­ods.

Make sure you have a team or prop­erty in­vest­ment spe­cial­ist ex­pe­ri­enced in build­ing port­fo­lios across Aus­tralia, who can pro­vide on­go­ing sup­port and help you man­age chal­lenges dur­ing the life of your in­vest­ment such as changes in ten­ancy and changes in strata laws.

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