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Retirement Planning 101: Pros and Cons of Investment Property for Retirement Income

Our retirement planning professionals have been helping clients in the Perth area since 2005. We have more than 80 years of combined experience in the financial planning and advising field. Property investing is currently a popular form of saving for retirement. We would like to share with you some warnings from the Australian Securities and Investments Commission about property investing to help you decide whether or not it is appropriate.

Investment Property for Retirement Income

“Pros” of Property Investing

One of the more attractive benefits about property investing is that you can create rental income while also benefiting from capital growth over time, assuming that your property actually does increase in value. Another benefit is that property is a less volatile investment than shares. When you invest in a bricks and mortar rental property, it is a tangible asset that you can touch and see.*

There is also a tax benefit to property investing. You can use the costs of maintaining and managing your property as an offset against your taxes. The interest on your loan can also be used to lower your taxes.*

“Cons” of Property Investing

There is always a chance that your rental income won’t be enough to cover your expenses. This forces you to take money out of your own pocket to pay your mortgage repayments or miscellaneous costs. If interest rates rise, it also comes out of your pocket and can consume any profit you may be making from the property.*

During times of vacancy, you still have to make the mortgage repayments, even though you don’t have a tenant. Housing is not “liquid”; you can’t sell off assets to raise quick capital. Also, property investment is often someone’s sole source of investment income. That means that there is no diversity and you are at the mercy of the housing market and interest rates.*

Costs can be high, counting stamp duty, real estate agent’s fees and legal fees. If your property doesn’t appreciate in value, you can lose money.*

Call Approved Financial Planners Today

To talk to a retirement planning professional, call Approved Financial Planners today: 08 6462 0888.

*Australian Securities and Investments Commission (ASIC), MoneySmart: “Property Investment.” https://www.moneysmart.gov.au/investing/property. 6 October 2015