Retiring with investment property

Retiring with investment property

What’s your retirement plan? With the average life expectancy getting longer every year, it means we all have to plan as best we can for our retirement, with the aim of being financially stable and secure long into our golden years. It’s more apparent now than ever before that our superannuation just isn’t going to be enough to fund the rest of our lives past retirement.

This is why more and more people are choosing to invest in property, as a way to build up their wealth in preparation for retirement.

Building up an investment portfolio over a number of years will benefit you in the long run, and is especially beneficial for retirees, as property can provide an ongoing income. Many people have the plan or idea to do this – and just haven’t yet got started.

So, how can you retire with investment property and use it as your long term income? There are two main ways; capital gains and rental income.

Capital gains

Capital gains is where the value of your property increases above what you paid for it. The additional value can then be accessed by you – by either selling the property or by loaning money against the equity in the property.

With properties tending to increase in value over time, you can draw on the equity in your existing properties and re-invest. Each year you would need to take a new equity loan for the year ahead. This is a great way to grow your portfolio quickly as you can take advantage of the equity in your properties. By the time you retire you have a valuable property portfolio.
While many investors begin investing for capital gains when they are starting out, often they will try to turn these properties into positive cash flow properties, from where they are earning a rental income, so that they can use that money to live on instead.

Rental income

By buying positive cash flow properties, or by paying off debts so there is no more owing on a property, it effectively becomes an income generator for you. Positive cash flow properties are those that generate more rental income than outgoing expenses.

This method may be seen as more conservative, but if you can buy a positive cash flow property, then it will generate income from day one. You can use this to help pay down the debt, or to fund further properties. Over time, the rental income will increase while the debt decreases, until eventually the debt is gone and the property is fully paid off. This then means that all of that rental income is accessible to you, for your lifestyle and retirement.

Some people with many properties, even sell a few to pay off the debts of the remaining properties in order to achieve this outcome faster.

The secret to any property investment strategy is to start early. Investment properties, purchased as part of your long-term retirement strategy, can be a greatly rewarding experience, financially and otherwise.

It’s also good to keep in mind that it doesn’t matter how many properties you own – what does matter is the value of your asset base, along with how hard you can get your money to work for you.

If you want to get started securing your future, talk to us at CPS Property today.