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Investing in property for your retirement - can you live off your dream with it?

If you are investing or planning to invest in property for your retirement, there are a few things you need to consider.

What’s your goal?

No matter what your reason for investing in property it’s important you know exactly what your goal is. It could be to eventually live off the rent from your property portfolio, to subsidise your income, to have a nest egg for security purposes, eventually pass the property on to your kids or hold it for capital gains purposes.

Be clear with your goal and have a strategy in place for how you will achieve it. Your Accountant or Financial Advisor should be able to help you define a reasonable goal and devise a strategy for how you will achieve it.

How many properties do you really need?

It’s the golden question, but unfortunately there is no clear cut answer that suits everyone. Once again it depends on your situation and what you hope achieve from your investment.

In some cases you might get a really strong performing property or two in a growing area that works hard for you and allows you to easily reach your goals, while other investors might have a portfolio of ten and still not have the financial freedom they crave.

It’s about finding balance, but don’t make the mistake of thinking that the more properties you have, the greater the rewards. You don’t want to be constantly increasing your level of debt, especially as you approach retirement. It’s better to have a number of properties you’re comfortable with and that provide you with healthy returns, and then focus on increasing their value and paying off your debts so you can further benefit when they become cash flow positive.

Is it a realistic goal to live off the rental income?

When people first think about investing they imagine that once they pay off the mortgage they’ll be able to sit back and live off the rental income. Unfortunately it’s not as simple as that.

There’s still going to be ongoing expenses that need to be taken into account. This might include property management fees, taxes, maintenance, repairs and other bills. Once these expenses are taken out of the rental income, it might only leave a few hundred dollars per week or less, just as example. While this is a great extra source of income, unfortunately it’s not often enough to live off alone as passive income, especially if you only have the one property.

In most cases, you will need other streams to subsidise your income and complement your strategy.

This might include things like superannuation and any gains from an eventual sale, which is best discussed with your Financial Advisor.

What’s the best age to start investing for retirement?

The earlier, the better. Property is a long term investment and the earlier you can purchase a property, the more time it will have to increase in value. This is why it’s so important to buy in an area with good capital growth in the first place. You’ll also have the advantage of seeing out a few property cycles so you’ll be able to ride out any lows and take advantage of the highs as they come around.

It also takes time to build an asset base and lower your debts. The more time you have to do this, the better your investment can perform.

Furthermore you should try to avoid acquiring too much debt as you reach or head towards retirement, as you may struggle to pay it off without a constant income stream.

Getting investment advice

When you’re investing in property for your retirement it’s a good idea to have an advisor, or a team of advisors, who can assist you to make sure you’re on track with your strategy and getting the most from your property. This may be your Accountant, Financial Advisor or an independent Property Advisor.

Your advisor can help you review your strategy and goals and adjust them at different stages of your life or the property cycle where required. They can also make sure you’re getting all the tax benefits you are entitled to as an investor - including property depreciation – to ensure you’re maximising your investment’s potential.

A specialist Quantity Surveyor can also help by making sure you claiming all the depreciation you are entitled to, which can help turn your investment into a positive cash flow asset, which is ideal if you’re investing for retirement.

For obligation free advice on your investment property situation, contact the expert team at BMT Tax Depreciation on 1300 728 726 or request a quote online.

Article provided by BMT Tax Depreciation. Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation. Please contact 1300 728 726 or visit for an Australia-wide service.

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