I’m in my mid-50s – should I invest in property?
Age is just a number when it comes to building a property portfolio, argues OpenCorp’s Michael Beresford
I often get asked by people aged in their mid-50s whether property is a good investment option at this point in their lives. My answer is, unequivocally, yes.
It’s never too late to start, provided you understand that the timeframe you expect to keep working will define your ability to borrow and buy investment properties, and continue to get tax benefits.
Ever heard that line about “60 is the new 40”? It’s not as glib as first seems. We’re living longer, working later in life and remaining healthy for longer.
Think back to our great-grandparents’ generation and considerably more people were employed in hard, physical labour. The world has moved from an agricultural society, through an industrial revolution to a technological revolution.
Whereas people used to reach their mid-50s with one eye on retirement, now it’s not uncommon to work into your 70s.
If you’ve got only two or three years left of work, property’s not going to be the ideal investment. But if you’re in your early to mid-50s, and you’re going to be working for the next 15 years or so, the equation takes on a very different complexion.
Think back 15 years ago – what was property worth? You don’t want to look back in 15 years’ time and regret you didn’t act.
I know people who have continued to buy properties into their sixties – though they may need to adjust the type of loan that the banks will be prepared to lend them, or will need a 20-year loan horizon.
This means repayments are higher to be able to pay off that loan in that time. Whether they keep the property that long or not is neither here nor there. The other main thing the banks will require is an exit strategy; they will look at your super balance and other factors.
Is the plan in 15 years to settle the property to pay the loan out and save the rest towards your retirement?
As people get into their 50s, they start to focus more on themselves.
The kind of comments I hear on a regular basis are, “Michael, we thought about this 15 years ago, then we had some kids and then life got in the way. And then we got busy, and we were focused on our careers, and now we’ve got 10 to 15 years to make something happen towards our retirement. And we need help.”
The reason why they need the help is because it’s a very different way of thinking, compared with how previous generations invested. Back then, it was a case of paying off the family home, and the government would save me with a pension because I’ve paid tax all my life. That’s a very different landscape today.
Shares appeal less because of their volatility, so for a lot of people, property’s more stable and it’s a proven performer in the long term.
One of the biggest challenges is overcoming the mindset about taking on debt, when all people have ever been told is, “Debt’s the devil, and we’ve got to get rid of it as quickly as possible”.
Remember, debt on your own home, which is covered 100% out of your post-tax money, and debt on an investment property, which gives you a $30-35,000 pay rise in the form of rental income and tax benefits and pays for itself, are very different things.
One advantage for older investors is they will often have their own home and have maybe paid off a good chunk of it. That ‘lazy equity’, as we call it, is a great resource to be able to ensure you’re not having to put cash towards investments.
That’s where getting the right finance structure is fundamental, because people are happy to use the equity, but they want to make sure that their asset is protected.
Our process is the same as with any client. The portfolio that people require is directly related to the goals they want to achieve, and the timeframe in which they want to achieve it.
Everything needs to be within people’s risk tolerance, but what we find is once they start on the journey and understand the mechanics of how it works, it’s not as daunting as they thought – especially when they’re having their hand held by experienced investors or professionals like us.
We’re all for positive thinking at OpenCorp – if you fancy doing something, go for it. Of course, hitting your mid-50s does have some limitations; if your ambition is to make the next Olympics, or becoming a global rock star, the time has probably passed J
But there is definitely one thing you’re not too old for, and that’s property investment.
- OpenCorp’s property specialists understand the process required to give you the best chance of achieving your financial goals – visit opencorp.com.au