Wealth and Property


Can Investment Property Create Wealth for Retirement?

We asked Bernard Kelly from www.property-investing-guide.com to give us his answer to this question…

…and here is what he came up with:

Retirement Wealth Creations and The Four Basic Principles

The Four Basic Principles that any genuine property advisor should assist private clients to focus on are:

  1. The ideal tenant
  2. The ideal asset
  3. The ideal location
  4. The ideal packaging

Now the closest most of us are likely to get to an unbiased property investment advisor is on a site like www.property-investing-guide.com  or perhaps through library books written by gurus. And be particularly aware that so-called investment seminars offer “advice” on only the particular product that they are selling, not the broad education that you need

  • Firstly let’s look at the concept of the ideal tenant

Now what you need as the ideal tenant is someone who will stay for some considerable years, and treat your asset as though it’s their own. And given my years in the field as a property investment advisor, I can tell you – without reservation – the the ideal tenant is a young couple with children in primary school

The ideal tenant is important as you will then be able to minimise those gaps in your cash flow whenever they move, and of course you won’t have to pay to your managing agent to find another tenant. And these two issues can cost you in excess of $2,000 whenever there is a change-over

So this rules out inner city CBD apartments, as they usually attract a class of tenants who are happy to move 250 metres into a brand new building (which will always have better amenities)

  • Secondly, the ideal asset

…..is obviously whatever will attract a continuing series of ideal tenants. Which happens to be a brand new four bedroom family home, air conditioned, with an ensuite and double garage on its own block in a family suburb

Now these assets are available in the outer suburbs of the major capitals for around $440,000 (at 2012-13 prices). Now these are very affordable to the average investor at these levels – your out-of-pocket contributions could well be below $150 per week – it is a comfortable entry level for first time property investors, and indeed there is no need to go higher as you don’t get proportionately more rent for a more expensive investment

And of course a family home is not subject to horrendous body corporate fees and sinking fund contributions that are associated with apartment buildings, townhouses or cluster housing, and of course your exit strategy – when the time comes to sell and refresh your portfolio – is into the broadest possible market i.e. home owners. Which explains somwhat why apartments never have the same percentage capital appreciation as homes have

Actually there are a number of potential investment assets – and locations – that are best avoided. In particular, any strategy that relies on artifical long term government subsidies is likely to come to grief when policies change

  • Thirdly the ideal location

With property, you’re really looking for maximum long term capital growth – such as you expect in such “new” economies as Queensland, and particularly the south-east of Queensland, which ticks all the boxes for long-term investors

Now capital growth in new suburbs can be a problem (particularly in regional towns) as developers can always buy additional farm land and keep values down by an over supply of new properties. Your best option to counter this problem is in a corridor in a capital city that has no other corridors available. So all the growth is tightly focused into this one corridor. Brisbane is the only capital with such a funnelled growth zone

However, you will only succeed with your portfolio if you can attract tenants, and as tenants will always gravitate to housing 20-25 minutes from where they live (in contrast to home owners who are often happy with a 60 minute commute) the ideal location must be near to a solid clusters of economic zones – where the jobs are

And you’re also looking for the lowest government taxes and council rates – both when you enter the market and also while you’re holding. These considerations point us again to Queensland but particularly to the south west suburbs of Brisbane, where all the elements that you need for a successful outcomes are there for you

  • Fourth – the packaging

To have the best outcome, you need the best legal and financial structure for your investment

Which is why I always suggest tenants-in-common ownership and long-dated interest-only loans

Summary and Conclusions

As your personal property investment advisor, I know that if you follow these Four Basic Principles, and with perhaps only three investments over ten years in a “normal” market, you could well have created a wonderful retirement nestegg

Now retirement planning is hardly ever discussed until it’s too late, but all you need to do to prepare for 20-25 years of comfortable retirement is to Start!

I’m Bernard Kelly, Australia’s Retirement Strategist® and while I’m not licenced to provide Financial Advice (I have a poor opinion of superannuation, anyway) I am happy to chat with you anytime about the solid methodolgy that I’ve developed over the years about my scientific approach to property investment

I’m happy to chat anytime, contact me via my website www.property-investing-guide.com

Bernard Kelly

 

Bayside Investment Property

 

 

 

 

 

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