Investing in property is a popular way to finance your retirement. Rental income can provide a steady stream of money that will keep coming in, even after you stop working. The best time to invest in property is always now – because property needs time to increase in value. If you’re thinking about getting into the market a little later in life, you may be worried about whether it’s too late to invest in property. The good news is it’s never too late to invest in property, however you may need to exercise a little caution as you get older.
Think about how you’ll finance your investment
Before a lender can approve a mortgage, they must be sure that you can make your repayments, or that you have a solid exit strategy. When most people buy an investment property, the mortgage is likely to be over a period of 25-30 years. For someone in their thirties, this is not normally a problem as they are likely to spend another few decades in the workforce. However, when it comes to an older investor, they may be significantly closer to retirement age (or already retired). In this instance, the lender may not be willing to offer a normal 30-year mortgage, because they cannot be as confident in your ability to repay the loan. This doesn’t mean you can’t invest in property, it just means you need to use a different strategy to finance your investment property.
Consider alternative ways to fund your investment
One way to fund your investment property is to offer a larger deposit upfront. If you can save 20% or more, you can avoid paying for the lender’s mortgage insurance. You can also apply for a loan to be repaid over a shorter period of time, for example 10-15 years. This will reduce your “risk level” from the lender’s perspective. Another way to finance your investment is to demonstrate to the lender that you could easily sell the property if need be. Showing that you have an exit strategy will prove you can manage any challenges that arise in relation to owning the property.
Create more growth in your assets
An investor in their 50s or 60s may not be able to wait several decades for their property portfolio to grow in value. However, you can be creative and manufacture equity via renovating, subdivision or development. For example, you could purchase a block of land and build a brand new home on it, or you might buy an older run-down house and demolish and rebuild it.
Consult a good financial planner
The closer you get to retirement, the more your financial affairs change. A good financial planner will help you navigate the challenges – and opportunities – that come with retirement, and they’ll explain how to manage your changes in superannuation, taxation and general finance.
Property investment can still be a smart move, even after 60. With an investment strategy and some prudent planning, investing in property can be a fantastic way to enhance your financial position.
Ross North Homes is one of Perth’s premier homebuilders. The award-winning company has over 40 years’ experience in building homes in Perth, with a focus on quality, style and excellent workmanship. Whether you’re looking to build a new home, or demolish and rebuild an existing property, Ross North Homes can make the entire process straightforward. To find out more, call Ross North Homes on 08 9431 8150.