It’s not too late!
In your 40s or 50s with no investments, minimal superannuation and panicking about your financial future? Stress no more because wealth-creation through property has absolutely no age limit.
While most property experts strongly advise beginning an investment journey as early as possible, there is no such thing as ‘too late’ in real estate. In fact, people in their 50s can easily add $500,000 to their retirement nest egg with the right strategy.
A lot of people have the mindset that it is too late, even if they are earning a good incomes and have equity in their principal place of residence. They are of the mindset that ‘property investment is not for me.’”
To begin their journey, aspiring investors must get the right mindset.
Think: It’s never too late to start and there’s no better time to start than now.
Much like starting a business, investing in property requires a well informed and carefully planned approach in order to get started. After all, it’s better to start a bit late than to not start at all. Beginning a wealth-creation journey at 40 or even 50 gives the investor 20 to 25 years before retirement—enough to reap the benefits of one, possibly two market cycles.
After getting the right mindset, aspiring investors are advised to determine their goals, which would be the basis of their future strategies. Then, they can move on to educating themselves before jumping into making any major decision, and ultimately continuing their education as they go through their investment journey.
There’s extensive research that goes into picking a property—from the location and the types of people living there to the full details on why the property itself is the right investment. The key to smart property investment is being very clear on your personal long-term strategy which will help finding the right property in the right location for the right price easier and less stressful.
The investment journey
Once armed with research and education, investors can now enter the accumulation phase, or building their portfolio by buying investment-grade properties.
Experts advise investors to focus on the fundamentals of property investment instead of falling for the ‘herd mentality’, or following trends. Ultimately, there should be strong focus on capital growth, as well as strong cash flow (rental income). To mitigate risks and accommodate any unexpected expenses, it is also encouraged to establish a cash buffer.
Among the indicators of good investment based on growth potential are rising median house prices, population and jobs growth, strong existing infrastructure and a healthy pipeline of new infrastructure, a buoyant local economy and a healthy balance between supply and demand.
Condensed, the simple property selection criteria comes down to three factors: Local amenities, infrastructure (existing and future investment) and rental demand.
At Prospa Property Advisory recommend mostly house and land packages or quality townhouses developments and suggest investors avoid high density, inner city apartments because the capital growth can be limited with such investment.
A strong focus for many of our investors is on brand new properties because they require less maintenance, everything is covered under warranty and it is more appealing to a tenant so they will often pay a premium to live in a more desirable property. There should also be considerable tax savings through depreciation that makes the overall cost of holding the investment much cheaper.
At Prospa Property Advisory, as a buyers advocate we have a benchmark requirements for recommending property. We suggest having at least 100,000 head of population residing in a 20km radius of a property, this provides a solid rental pool – as well as a resale as a resale market should the property need to be sold.
We recommend investors avoid single industry employment locations such as mining or defence towns, which can see large drops in house pricing and rental demand if the major employer closes or relocates. We also avoid areas which have a large percentage of rental properties as excessive competition among landlords can lead to reduced rents, which is generally not what you want as an investor.
To help them make smart decisions, investors are encouraged to engage professionals, like Prospa Property Advisory. By doing so, they get a full analysis of the market and a deep understanding of strategies that will align with their investment goals.
The best professionals are educated, experienced and licensed. Above all, they are focused on delivering best client outcomes, without having to satisfy personal motives.
Property professionals should acting ethically and in the investor’s best interest. A real estate agent giving unqualified and unlicensed advice (or worst still guiding purchasers solely into only the few properties they have listed for sale) could be detrimental to investment potential.
Over a longer period an investor will accumulate enough properties to satisfy their goals, then they will enter the consolidation phase and slowly reduce the debt on their properties, ultimately increasing the cash flow that they can channel through to their retirement nest egg.
Finally, after the consolidation phase, the investor can enjoy the lifestyle phase, supported by the property portfolio that they have managed, grown and protected through the years.
The investment property process should be viewed as a long-term strategy and supported by advice from professionals who understand the process, have the research to hand on the Australian property market and, most importantly, have the investors best interests at heart. Right now is the best time to start that journey.