The clock’s ticking: Most property investors are plagued by the thought they’ve started investing too late.
They understand the power of compounding, the growth potential of well-chosen property, the impetus of gearing and leverage, the sizeable tax breaks.
These very compelling factors would ideally work together over time. Doesn’t it all take time to build a large property portfolio? What if I’m in my late 40’s or 50’s and only have, say one property under my belt? Won’t I need another eight or nine properties, all of which will take a good few years at least to accumulate?
It’s true that it takes time – proper wealth-building through property isn’t an overnight or get-rich-quick affair. It’s powerful and effective, but it’s not instantaneous.
Having said that, with the right factors in place, a base of wealth can be built at quite a rapid rate.
So, in response to the answer to our original question about how late is too late to start investing for retirement, we can see a few things.
Firstly, a ‘pure’ property retirement where you accumulate enough properties to generate sufficient passive income to cover your living expenses will take something of the order of 20 years. So, if you want to retire by 60, you’ll need to get your investing underway before you’re 40.
However, the fact that most people will have a payout from their compulsory super means it’s not likely to be an either/or prospect where an investor relies solely on either property or superannuation to fund their retirement. The more likely option will be some kind of hybrid arrangement, which could in fact speed up the whole process.
If your own home is wholly or substantially paid off – which is more likely the case if you’re older – this will lessen the time needed for a property-funded retirement. Note that this doesn’t necessarily mean you should pay off your own home first before you start investing (if you’re younger): it takes time for the home loan to be paid off in addition to the investment portfolio to be accumulated. Rather it’s to say that if you’re in the situation where your own home is paid off, retirement is a quicker prospect.
If you’re nearing retirement age and want to take advantage of property’s wealth-building potential, you should seriously consider setting up a self-managed super fund and filling it with high-growth, geared properties. Make sure you’re able to keep the properties in the fund for at least one property cycle so that you get the benefit of the upswing in values, to maximise the tax-free capital gains your portfolio may offer.
Property is a highly flexible wealth creation vehicle – there are many ways of arranging property assets, financing, employer super, and other asset classes in any one of many configurations. There’s a whole matrix of possibilities open to the creative and intelligent investor.
Rather than asking “have I started too late to invest in property for retirement” it might be more useful to frame the question as: “given where I am now – how can I make property work for me in a way that yields the best results for a wealthy retirement?”
It’s comforting to know that whatever your age or stage of life, property has both the flexibility and the wealth-building power to deliver an earlier, more secure, or more prosperous retirement.
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