Recipe for Property Investment Success

Whether we are being held back by fear or lifestyle choices, more Australians should be considering investing in a property portfolio to secure their financial future.

It wouldn’t be a huge assumption to say that most of us would retire as early as possible if we had the chance. So why aren’t more Australians investing in growing a property portfolio – a very real way of achieving this admirable goal?

Latest Australian Taxation Office (ATO) statistics tell us that around two million Australians own an investment property – that’s a little over 8% of us. And of those around 72% own a single investment property. Only 18% manage to invest in two or more properties, and 1% in five or more. Only 0.5% are self-funded retirees This indicates that most investors are dabblers and not entirely committed to the goal of retiring on a passive income.

What’s the Problem?

What happened to the Aussie attitude of ‘she’ll be right/have a go mate’? Well, it might have something to do with concerns over being able to afford it short-term (and long-term) and the genuine fear that they could be left in a worse situation.

For every success story, there is a doomsayer ready with an anecdote about how difficult it was to find tenants, the cost of constant repairs and the strain of meeting monthly financial obligations.

A recent survey conducted by lender State Custodians found that:

  • 65% of Australians are anxious about whether property investment is viable
  • 35% believed it would too difficult to come up with enough for the deposit
  • 23% worried that they would be taking on too much debt.

In fact, building a property portfolio is a relatively low risk, profitable option for many people from many income brackets – one in three property investors have an annual household income of under $100,000.
Retiring Well

Without some kind of wealth condition, the majority of Australians will be forced to rely on superannuation/pension to fund their retirement.

According to ASIC (Australian Securities and Investment Commission), a couple living a modest lifestyle requires around $34,855 annual living costs. A comfortable lifestyle would require $59, 971. Singles require $24,250 (modest) to $43,665 (comfortable).

In contrast, the most recent figures on superannuation from the Australian Bureau of Statistics show that at retirement age, men have an average balance of $322,000 compared to $180,000 for women.

If you retire at 65 and meet the average life expectancy of 82 that leaves a pretty significant shortfall and heavy reliance on the age pension – around $32,000 per couple.

With women more likely to retire with less superannuation than men, it’s no surprise that half (47%) of Australians who own investment property are women keen to try to improve their financial situation, according to data from the Australian Taxation Office.


Is it the Right Time?

In addition, tightened lending conditions, a cooling market and pockets of oversupply have also confused the issue leaving potential property investors wondering if this is the right time to start.

However, those already in the game, however, remain optimistic about the property market.

According to the Property Investment Professionals of Australia’s (PIPA), a survey of 742 investors, indicated that the majority of investors (70%) believe now is a good time to invest in residential property. Meanwhile, 61% are looking to purchase a property in the next six to 12 months (up from 58% in 2016).

If you take into account the population growth, lower unemployment rates, low-interest rates, an increased number of renters (31% of Australians) and good capital growth and rental yield in our major cities and it feels like a pretty good time to give the investment property market a go.

Like many things in life, building a property portfolio sounds harder than it is. All you need is commitment and initial courage and it will fall into place.

5 Ingredients for Property Investment Success

  1. Be bold. Start with a definite hunger to achieve the goal of being a self-funded retiree.
  2. Make a decision on how much income you want and work towards that e.g. $70,000 per annum with no mortgage.
  3. If you have paid off five properties or have one to live in and four properties each producing an income of $25,000 you will have $100,000 per annum.
  4. Believe in yourself and go for double. 10 properties should be the plan.
  5. Keep in mind that the property market is cyclical and doubles every seven to 10 years.
  6. When half of your properties are worth double what you initially paid for them and the equity covers your mortgages, you will need to sell them to pay off the other half of your properties.

In addition to the above, you will need to find some great professionals to assist you along the way including a buyer’s agent to help you find the right property for capital growth, property manager, solicitor, accountant and mortgage broker.

No matter what age you are, it’s never too early or late to start building yourself a profitable property investment portfolio. Talk to Cohen Handler about finding the right property at the right price.

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