By Rich Harvey, CEO & Founder, propertybuyer.com.au
You scrimp and save your whole life working hard, paying taxes, raising kids, advancing a career and just generally building a life.
Then, one day, a significant event or sudden realisation derails you – along the way you somehow forgot to plan for your financial future.
It might be that your relationship falls apart and you’re left wondering what to do now those dreams of retiring together are over. It could simply be you hit a milestone age and it dawns on you that there are only a few more working years ahead.
Whatever the trigger, you’re not alone. I chat almost every week with someone who feels like they’ve left it too late to successfully invest in real estate. Some have no experience whatsoever, while others who were burned by a bad deal in the past are afraid to go near real estate again.
Whatever the reason, they’re convinced they’ve missed their chance.
But I’ll let you in on a secret… they haven’t.
There’s still plenty of opportunity for 50-year-old-plus investors to make significant return on property. You just need to adjust your thinking and focus on a new strategy that suits your age, stage and plans.
Mindset first
There are several advantages to being a 50+ investor.
By this time most people have pulled together a few assets. There will usually be a home that’s had its mortgage payments dutifully attended to for years. That same home will also have risen in value, so 50+ investors have this equity at their disposal. In fact, the last two years will probably have delivered the largest dollar increase in value your home has ever seen. Now is a great time to take advantage of this.
There are normally other assets too. They could be shares, cash and even chattels gathered along the way. Most potential investors are surprised to learn their net worth once an expert runs through the numbers.
Then there’s finance. While some might baulk at the idea of applying for a loan, there are upside too.
Most people have gone through the lending process at least once by this stage, so they know what to expect. They will also have established a savings pattern and understand the operations of their financial institution. They might even have strong ties to a manager within their bank. By working with talented and experienced mortgage brokers, you might be amazed at what can be achieved in terms of lending.
Age also brings wisdom, experience and realistic ambition. These work in unison during important decision-making processes.
Wisdom and experience are things younger inventors. By age 50 you know your risk tolerances. You understand the importance of having backup options. You are aware that it’s crucial to have exit strategies and ‘just in case’ measures.
Investors around this age will make decisions based on the numbers and won’t overestimate their ability to fulfill commitments like loan repayments or deal with tenants. They’ve seen a few economic cycles and understand how things can ebb and flow.
Realistic ambition is also important. By this age, you aren’t wanting a bigger boat. Most will simply want to retire comfortably and do the things they enjoy. It’s not about throwing caution to the wind and looking for the big payoff. This is invaluable when it comes time to making the right investment choices.
By the time you turn 50 you should also have a decent amount of savings in your super fund. And depending on your circumstances, there could be some advantages to setting up a Self Managed Super Fund (SMSF) – but make sure you get specialist advice from a licenced planner. Using a SMSF to buy property can provide considerable advantages as you approach retirement age along with favourable tax rates.
Here’s another thing that’s all too often discounted by older potential investors – you still have plenty of time in the market to enjoy capital gains.
Property price cycles run from seven to 12 years on average. That said, if you pick the right market and property type, expect to do even better. Therefore, it’s not unreasonable to think you’ll see two or more price cycles between now and when you decide to sell down your investments, even if you start investing at age 50 or 60.
The final advantage is that by this stage, most of your dependants have moved on. The cost of kids is behind you. At age 50 you are still in your peak earning years too.
This will all look good to a financier.
The keys to success
As you can see, latter year investing is full of potential. To get the best possible outcome, however, you must apply a few key principals.
1. Asset Selection
Choosing the right investment in the right location is crucial.
As you get closer to retirement, it’s important to weight investments more heavily toward cashflow, for example. You don’t want to forgo capital gains of course, but cashflow is the thing that will sustain you in retirement. It delivers security around servicing debt. It also puts more dollars in your pocket once the loan is substantially paid off.
2. Good advice
Relying on independent professional advisors to help secure the best assets for your plan is essential. Locating the types of assets I describe above can be tricky and time consuming. A buyers’ advocates with specialist qualifications and experience can help identify and secure the right property in an ideal location. It will be a holding that aligns with your risk profile, and delivers excellent returns and value growth.
3. Single mindedness
Finally, once you have a strategy, stick with it. Markets will move up and down. Economies will rise and fall. However, if you follow your plan and buy the right assets at the appropriate times, then riding out the fluctuations will prove fruitful. Don’t let your plans be derailed by a little short-term bad news. Take the long view and reap the rewards.
There are great opportunities in the property market right now. The recent slowdown in activity means vendors are becoming more negotiable on price and terms.
If you’re keen to invest, but worried you’ve left it too late, don’t be. Instead contact one of our buyers’ advocates and talk through your options. You’ll be pleasantly surprised by what can be achieved, and the excellent outcomes smart investment brings to your retirement.
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