Why property investment is important in the lead up to retirement
Thinking of retiring? Real estate author and buyers agent Patrick Bright recommends buying an investment property at least a decade before you make the big jump.
he EPS Property Search director and author of The Insider’s Guide to Profitable Property Investing said retirement required a balanced approach with the need for a combination of assets in and outside of superannuation.
“The reality is that most people won’t have accrued enough super to keep them in the lifestyle they are accustomed to when they retire,” said Bright.
“Often people who are getting closer to retirement have a lot of disposable income with many at the height of their career and the kids off the books.
“It’s incredibly important to take advantage of this situation and set yourself up with the right investments to ensure you can enjoy all that retirement has to offer.
“When you’re in your fifties you still have time to build up a small portfolio with a range of investments and property is an important piece of the investment puzzle because it’s lowrisk, insurable and it’s not going to disappear.”
Mr Bright urged those 50 and over not to ‘play the casino’ or try to ‘play catch up’ warning against any investment in particular property investments that promised well above average returns. “The greater the return the greater the risk,” he said. “In your 50s you don’t have time to recover from a significant financial loss and secure your retirement if the investment goes pear-shaped.
“Instead this is the time to consider the preservation of your capital ahead of the return on it.
“You should be investing and protecting your financial position with reliable income producing assets that generate both capital growth and cash flow and property plays an important part in this strategy.”
Here are my two key rules for investing for those 50 and over:
1. Protection and preservation of your capital is more important than the return on it.
Invest in secure, quality property primed for capital growth rather than speculating by chasing the latest ‘hot spot’. Investing in locations with upside is important however looking at a location’s history and track record is equally important. Capital cities offer the best opportunity for consistent capital growth, particularly in the inner ring around the CBD but not in it. Buy for high capital growth not high rental yields as these properties generally have high overall returns over the long-run.
2. Invest in the liquid part of the market
It’s wise to invest in property that is easy to sell when and if you need to regardless of market conditions at the time. Here, I recommend buying investment properties around the median price for the suburb you’re investing into. I would stick to 20% above or below the median. There are always plenty of buyers and plenty of tenants in the middle of the market. Patrick Bright is the Director of EPS Property Search. As a buyer’s agent he has purchased over 500 million dollars worth of real estate for clients and is the best-selling author of four Real Estate books in his “Insider’s Guide” series.