It's important to get some education BEFORE signing up to ANYTHING

How To Fund Your Retirement With Investment Properties

People start investing in property for a variety of reasons. Some are seeking a change in their life, hoping to escape that 9-5 grind and focus on the things that are important. Others are just after a little more financial freedom or some security against any unforeseeable challenges that may arise in the future.

But many people will look to property investing as a way to fund their retirement so that they don’t have to rely on the pension and can enjoy their post-work life to the fullest extent.

But success in property investing doesn’t come overnight. It can take years to finally see the benefits of property investing. So if you’re considering property investing as a part of your retirement planning strategy, it’s important to start investing sooner rather than later.

Here are some key things to remember when forming the best investment strategy for retirement!

How can a rental property fund your retirement?

It’s important to understand the basics of property investing, specifically how a rental property can make you money for retirement.

An appreciating asset

Appreciation refers to the amount that your investment will grow in value. Investing in property means having an asset that will appreciate over time. Of course, this isn’t always guaranteed, with many external factors such as the housing market, property location/type, and interest rates influencing appreciation.

Once that property has grown in value, you can either sell it and pocket the profit, or borrow against the equity that comes from capital growth.

Tax benefits

Owning a property can mean being eligible for a range of tax benefits. Tax deductions can be made on interest-charges on a mortgage for an investment property, land tax, building depreciation, repairs for wear and tear, and more!

While many of these will be specific to certain circumstances, the tax benefits on offer in property investing can be a great way of saving money for the future.

More income

Having a cash-flow positive property means you’ll be making money from the rental income. You can use that rental income to grow your property portfolio by saving for the next deposit, or put it towards retirement savings.

As a landlord, you set this rate, and as a result, will determine how much rental income you make each month. But remember, you need to balance this by considering what a tenant would be willing to pay. That’s why it’s important to try and increase the value of the property.

The income you receive from property investing will depend largely on keeping tenants living in your home and maximising the value of the property.

What to consider before investing

While property investing is a great way to save up money for retirement, there are some key things to consider before making property investment a part of your retirement goals.

Knowing your retirement plans

We already mentioned that it can take some time to grow a property portfolio and really see the benefits of property investing. But success will depend on a range of factors, with the income you make from those investments varying based on aspects like property location and the rental market.

For example, investing in an area that allows you to set competitive rental rates will often mean greater returns. But this also means having the capital to buy in that area. It may be more realistic to buy into a cheaper area, which will mean having to wait a couple of years before you can see a considerable profit from increasing the value of the property over time.

Of course, the earlier you can get into property investing, the better. Plan to retire in the next 5, 10, 15 years? Now is the perfect time to invest. But if retirement is only a few years away, it may not be ideal to rely on investing alone.

While it’s never too late to invest and make money from property, it might not necessarily be enough to fund your entire retirement.

Having the means to invest

The biggest hurdle to start investing in property is saving that deposit for the first property. This will involve putting a 10-20% deposit down payment for investment properties, as well as presenting a solid income history/savings account to any potential lender.

But this initial deposit isn’t the only expense when it comes to investing in property. Many properties will require repairs and maintenance, especially those cheaper homes bought with plans to make repairs to manufacture capital growth.

Repair and maintenance costs will continue for the life of the property, with any wear and tear taking money out of your pocket. Taxes and other fees are also another consideration to keep in mind when deciding whether property investing is right for you.

Many people in the middle of their career have a range of financial obligations that means saving for that deposit just isn’t possible. But keep in mind that there are a range of ways to invest in property without having to save for a deposit.

Funding retirement with property investing starts with having a good understanding of your resources and limits. By knowing what these limits or obligations are, you can start planning out ways to overcome these hurdles and start investing within your means.

Knowing what’s involved in owning property

The work involved with investing in property doesn’t end with making that initial purchase. There are a range of commitments, which can involve a fair bit of work. We’ve already mentioned maintenance and repairs, but you’ll also have to carry out jobs such as tenant management (e.g. screening, rent collection, lease construction).

While it’s important to be aware of the work involved, this really shouldn’t deter you from investing in property. We understand that retirement shouldn’t involve more work. That’s why having a good property manager is a great way of deferring these tasks to someone who’s not only ready and willing, but is also an expert in carrying out these tasks.

While property investing can be a relatively safe investment for seniors, it’s not always smooth sailing. There will be obstacles along the way, from rising interest rates to tenant vacancies and a range of other factors which influence the property market.

But with the right education and understanding of property investing, these can be managed. Property investing, when done right, can be the key to an enjoyable retirement, free from any financial stress or worry.

PK Gupta
Published: 31 Oct 2022


The Top SIX Reasons Why New Property Investors...


A Simple Way To Use Debt To...