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.

Business First - - SPECIAL FEATURE - PROPERTY VALUE -

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.

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