April 05, 2019
By Jocasta Noonan
The property market as a cornerstone for your early retirement investment strategy
Those on the cusp of retiring, or considering early retirement are often dismayed at the prospect of not having enough. According to professionals, retirees will need around 70% of their pre-retirement income once they retire, and the odds of saving enough seem slim as time runs out. To supplement their retirement income, many are looking at other investment avenues along with their retirement schemes. Those looking to property as a start to their investment strategy, will find that even a family home can be the starting block.
Building up assets to offset liabilities
One of the best characteristics of a property is the fact that it acts as an asset even though the loan portion is considered a liability. One of the biggest things investors often need to remember when purchasing a house as an additional income at retirement is that value takes time. Over time, as the loan decreased and the value of the property increases, the property has more equity available. In order for the property to be a successful component of an investment strategy, it needs to be purchased well in advance if a mortgage is required. This ensures that there is enough equity at retirement in the case of a sale, or that any rental income is used as a supplemental income.
Retirement strategies that start from day one
Those who aren’t keen on waiting for the golden handshake can set up their property portfolios in such a way to ensure that early retirement is possible. Investors who wish to build up a property portfolio to supplement their income will find that simply investing in a single property might not be enough to beat inflation and provide a sustainable income. According to experts, the golden number of properties is around 3 to 4 for those who aim for a $61,500 annual income.
Access maximum potential in your property
While the obvious options for property owners are to take on a tenant, properties can also generate income in other ways. For instance, a home-based business is a good place to start. Other options include renting out storage facilities, starting a bed-and-breakfast, or host events at the property. In many cases, there are tax benefits to running a business from home, which could relieve some of the pressure of the mortgage payments. This is also a good way for retirees to remain busy after retirement, especially those looking to retire early.
Property as a recipient of investment funds is the ideal long-term option, as it offers numerous income streams and in the event the owner wants to sell, there is usually a substantial profit when the conditions allow it.