Investing in property
Two great Australian dreams – property and retirement
As safe as bricks and mortar, they say. Well, property can be a great long-term investment, and at retirement the family home is usually your largest single asset. Did you know that owner-occupied residential property accounts for over 40% of average household assets*?
However, while property tends to be less volatile than shares, investing in property is not without risks. Prices can go down as well as up, and so can rent. As with any sort of investment, there will be additional costs involved:
- Real estate agent costs are typically 5 to 12% of gross income**
- Advertising costs and letting fees
- Insurance and general upkeep and maintenance
- One-off costs like stamp duty and legal fees
- Ongoing expenses, land tax, council rates and utilities.
You should take these into account when calculating the return you can expect to receive from your investment property. As with all investing, the price you pay for an asset is the most important driver of your future returns.
Unlike shares or managed funds, property is an illiquid investment. Meaning, it takes time and costs money to sell your asset, and it usually can’t be divided – you can’t sell one bedroom of a three-bedroom house to fund your living costs!
Be prepared for the big and the little surprises
A balanced portfolio to fund your retirement needs to have enough liquidity to meet your anticipated spending needs, and then a bit more in case things change.
If you’re planning to invest in direct property you should make sure you have enough liquid assets so that you’re not forced to sell your property in a hurry, which usually means getting a lower price.
When it comes to building your nest egg, why not think big?
Some people enjoy being involved in their investments and direct property is definitely more ‘hands on’ than most investments. If you don’t think you’ll have the time or the interest to stay on top of all these, you may be better off investing in a fund where professionals manage things for you.
Investing in a fund has additional costs, but the advantage is that property investment gives you the benefit of participating in a diversified portfolio. This reduces risk and gives you exposure to assets you might otherwise not be able to afford on your own.
At StatePlus, our funds invest in some of the best quality office towers, shopping centres and industrial properties in Australia. We can also invest in overseas assets and infrastructure, which helps us generate a reliable income stream from a diverse range of tenants.
When it comes to building important things, your friendly StatePlus team member can help you navigate the complexities of wealth creation. Call us today on 1800 620 305.