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Welcome back everyone. In the sixth and final part of my blog series, I want to discuss something that affects all of our financial journeys: Superannuation. Perhaps you’re concerned about your retirement savings? Or maybe uncertain about how to make the most .....
When you’re young and working on building your career, you may not have the impressive salary you’ll have a decade or two from now. But you have something that is priceless when it comes to investing: you have time.
Time is an asset with any kind of investment. The sooner you start salary sacrificing, the larger your super fund will grow. The sooner you start saving, the more interest you’ll earn over time. And when it comes to property investing, time is also a considerable factor in your potential success.
There’s an old saying that goes like this: the best time to plant a tree was twenty years ago. The second best time is today. This is very true when it comes to property investing. Here’s why.
If you’re going to buy an investment property in your 20s or early 30s, you’ll probably get a 20- to 30-year loan. That kind of commitment can seem daunting, but you have plenty of time to pay it off. And if you hang on to that property and take care of it, you can have it fully paid off before you retire.
The first years will be the tightest financially. Your property may not provide much cash flow after you pay the loan, taxes and maintenance expenses each month. But rents rise over time, and assuming your mortgage repayments stay the same, your investment property should in time, provide positive cash flow.
Eventually, your loan will be paid off, and your expenses for the property will be reduced to taxes and maintenance. If you can pay off your loan before your retirement, you will have secured a reliable income from your rental property.
Real estate markets ebb and flow, but over time, property prices generally rise. All you have to do is look at the Australian housing market over the past few years to see that investing in property can be a very good financial move.
Property prices in Sydney have increased by more than 11 per cent each year over the past five years.
If you can pick up a property during a downturn in the housing market, you’ll have an easier time cash flowing at first. But even if you don’t get a particularly good deal on a property, you can count on prices rising over the next 30 years.
For most property investors, the first step is the hardest one to take. Anytime you invest, you’re taking risks, and this is as true with real estate as it is with stocks and mutual funds. However, many property investors take comfort in the fact that property is a tangible asset that includes the land beneath it. You insure that asset against fire, storms and theft. So in some ways, it can be less risky than some other investments.
As with any skill, investing in property has a learning curve. You’ll need to learn about finance and lending, running a business, marketing your property and keeping up with maintenance. You might learn about renovations and remodelling, legal issues like contracts and leases, and working with other professionals like property managers, realtors, lenders and contractors.
If you start investing in property while you’re still young, you’ll be able to use these newfound skills for many years. You’ll get good at investing in property and renting it out. You’ll make contacts and expand your network. You’ll learn new skills. With years ahead of you, you can make the most of these skills by leveraging the equity in your first investment property and using it to buy more properties, expanding your wealth and creating a more secure financial future for yourself and your family.
For more information about property investing, or to speak with one of our wealth advisers about growing your portfolio, reach out to us at Altus Financial. We’re here to help.
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