Tips on using property investment for retirement planning

Retirement planning. They're words that are often associated with mixed emotions. It’s meant to be a time of winding down and having the chance to enjoy the remainder of your life, but quite often the lead up can cause a lot of stress.

Tips on retirement planning using property investment
  • 15 September, 2016
  • PROPERTY MANAGEMENT
  • Property Investment, Retirement Planning

Eventually there will come a time where you will have to take a serious look at your future financial plan and pool in all your resources. For many people, Kiwisaver, Superannuation and other government pension options will probably not fund your dream retirement lifestyle. Investing in property is a great way to supplement these traditional retirement schemes, and its generally a lot less riskier than the share market.

This might seem like a big step, especially if you haven’t owned investment properties before and you’re not sure what’s involved, but buying property now in preparation for your retirement might be the best decision you’ll ever make.

First steps

Investing in property as a retirement strategy is a long term investment. It’s not something that happens overnight. It takes time to build a good property portfolio, understand the market, and put systems and processes in place to see your properties producing a good return.

This means preparing in advance and saving early so you can buy sooner rather than later. It is never too early to start planning for your retirement. So long as you have proof of a steady employment history there shouldn’t be a problem. You may be able to use equity on your current home to gain capital for an investment property, and all going well you can use equity gained through each successive property to fund the next one.

There are several vital factors to consider when buying a property investment for retirement. Buying the first house you visit and can afford may not necessarily make you any money. You may potentially end up with a house in a troublesome area, with difficult tenants or a difficulty getting tenants, and spending more on fixing the house than you’ll get back.

We recommend going through a local, trusted and professional agent when you’re in the process of buying an investment. Although it might be more expensive to buy initially, in the long run you will get a better profit and a consistent cash flow than buying the first house you see. The last thing you want in your retirement plan is to be losing money!

 

It would also be sensible to make sure that if you don’t have the time and patience to deal with tenants and the property 24/7 make sure you hire a reliable and organised property manager to do the work for you. It will again save you stress, time and money, and help you get the best return from your investment.

Selling down to one passive source of income

As you approach retirement age, many property investors start selling some of their properties to cover outstanding mortgages and make their portfolio easier to manage. Keeping one or two properties as a source of passive income can go a long way to compliment your government pension programme, helping you achieve your dream retirement lifestyle.

The bottom line is investment properties can provide you with a retirement that you can enjoy in comfort and style as well as leaving a legacy to pass on. But the importance of planning ahead, starting early and having the right knowledge and advice is the difference between a happy retirement and a messy, costly and unpleasant one.

 

LJ Hooker NZ

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