In their plan for retirement, many people invest in the share market as a means of building wealth for the future. However, the common perception is that diversification of your investment portfolio is a way to minimise the risk of losing a lot of money at once.
Investing in property presents a great opportunity to achieve this that can offer many benefits to investors.
If you are not already involved or haven’t put in many hours of research into the share market, it can be a strange, confusing and unpredictable thing. Trying to understand an explanation as to why one share went up and another went down can certainly be head spinning at times.
To investors, real estate represents an opportunity that is reasonably steady and can easily provide an income stream during retirement. You will rarely see property value or rental yields jump significantly in a short period. Instead, property values can consistently grow over time.
It is also a good opportunity because, when investing in real estate, there are steps that owners are taking to boost the value of their investment. Improvement works to the property like renovation or landscaping are just some of the ways an owner can take improving the value of their asset into their own hands.
A bonus is that doing this can often provide a strong justification for rental increases that will see a better return on investment over the years.
It is important to note that, while initially your returns will be lower due to the cost of taking measures to improve the value of your property, once the mortgage is paid off (hopefully by the time you retire) you can continue to rent out your property to maintain it as a revenue stream. You could also live in your investment or choose to sell it. There are a lot of options.
As with all investments, there comes some risks and downsides to investing in property.
Property prices can fall as well as rise. The entry costs such as stamp duty can be high and there are always going to be ongoing costs when you purchase a property as an investment, just like there would be with your own home.
Maintenance costs, insurance and replacement appliances can all be costly on their own – let alone if they happen at the same time.
When it’s time, disposing of the investment can also be expensive due to real estate agent fees and it may take time to complete this exercise.
But, in the long run, investing in property can present a lucrative strategy for planning a comfortable retirement that many Australians are already taking advantage of.
Planning for the future is an important step for everyone to take. If you’ve already invested in property and are seeking ways to maximise your return on investment, or if you’re considering property investment, our real estate experts can help!
General Advice Warning: The advice has been prepared without taking into account your objectives, financial situation or needs. You should therefore consider the appropriateness of the advice, in light of these objectives, financial situation or needs, before following the advice. We recommend that you speak to your accountant and financial adviser to help you determine whether direct property investment is right for you.