Buying real estate is almost a national pastime, with more than one million Australian houses currently owned by property investors. Investing in bricks and mortar is a wealth creation strategy that many people use to set themselves up financially for retirement, and for good reason.
“Too many Australians currently rely on the government to fund their lifestyle in their retirement years, and this is becoming more and more problematic,” says Sam Henderson, author of Financial Planning DIY Guide.
“By 2030, our population over the age of 80 is set to quadruple… so if you want to maintain a comfortable lifestyle now and in retirement, you’ll need to be self-funded.” Investing in property is a great place to start, but as with all major financial decisions, you need to be armed with information before you take the plunge.
Damon Nagel, managing director of property investment advisory firm Ironfish, recommends that investors who adopt a long-term view and strive to build a balanced portfolio will have the most success. Following are Nagel’s three golden rules for investing in property:
Have a clearly defined strategy “From the outset, adopt a clearly defined strategy and aim to build a portfolio that will meet your objectives,” he says. Property investment can be broken down into three distinct phases – growth, consolidation and income realisation – and your objectives will determine the strategy and the types of property in which you choose to invest.
Invest where investment is being made Property in areas where significant infrastructure investment is being made is likely to enjoy strong capital growth and be attractive to renters. “In South Australia, for example, we have hubs where new infrastructure is being built or is earmarked for future investment,” he says. “Look closely at these areas for their long-term potential.”
Minimise your time managing your investments Establishing and managing a property investment or investment portfolio shouldn’t consume all of your time or impinge on your work and social life. “It should be as passive as possible,” Nagel says. “Consider how you get set up your property portfolio in a manner that allows you to almost forget it. This can be achieved by investing in low-maintenance properties and by engaging a competent property manager.”
One final tip!Don’t follow anyone’s advice unless they can walk the walk. “I advise investors to steer clear of advice from people who don’t have their own property investments,” Nagel adds.