This is why more and more people are choosing to invest in property, as a way to build up their wealth in preparation for retirement.

Building up an investment portfolio over a number of years will benefit you in the long run, and is especially beneficial for retirees, as property can provide an ongoing income. Many people have the plan or idea to do this – and just haven’t yet got started.

So, how can you retire with investment property and use it as your long term income? There are two main ways; capital gains and rental income.

Capital gains

Capital gains is where the value of your property increases above what you paid for it. The additional value can then be accessed by you – by either selling the property or by loaning money against the equity in the property.

With properties tending to increase in value over time, you can draw on the equity in your existing properties and re-invest. Each year you would need to take a new equity loan for the year ahead. This is a great way to grow your portfolio quickly as you can take advantage of the equity in your properties. By the time you retire you have a valuable property portfolio.
While many investors begin investing for capital gains when they are starting out, often they will try to turn these properties into positive cash flow properties, from where they are earning a rental income, so that they can use that money to live on instead.

Rental income

By buying positive cash flow properties, or by paying off debts so there is no more owing on a property, it effectively becomes an income generator for you. Positive cash flow properties are those that generate more rental income than outgoing expenses.

This method may be seen as more conservative, but if you can buy a positive cash flow property, then it will generate income from day one. You can use this to help pay down the debt, or to fund further properties. Over time, the rental income will increase while the debt decreases, until eventually the debt is gone and the property is fully paid off. This then means that all of that rental income is accessible to you, for your lifestyle and retirement.

Some people with many properties, even sell a few to pay off the debts of the remaining properties in order to achieve this outcome faster.

The secret to any property investment strategy is to start early. Investment properties, purchased as part of your long-term retirement strategy, can be a greatly rewarding experience, financially and otherwise.

It’s also good to keep in mind that it doesn’t matter how many properties you own – what does matter is the value of your asset base, along with how hard you can get your money to work for you.

If you want to get started securing your future, talk to us at CPS Finance today.

According to the CoreLogic RP Data Home Value Index, dwelling values were absolutely flat across the combined capitals during December, with negative movements in Sydney, Adelaide and Canberra being offset by a rise in dwelling values across the remaining five capital cities. The Sydney housing market was the main drag on the December results, with dwelling values down 1.2%, while values were down 1.5% in Adelaide and 1.1% in Canberra. The remaining capitals saw a rise in dwelling values, led by a 2.3% bounce in Perth values and a 1.0% rise in Melbourne values over the month.

Index results as at December 31, 2015

After dwelling values had been broadly rising since June 2012, the December quarter results revealed a 1.4% fall in dwelling values across the combined capitals, the largest quarter on quarter fall since December 2011. Six of the eight capital cities recorded a negative result over the December quarter, with weaker conditions in Sydney and Melbourne acting as the greatest drag on capital city performance, according to CoreLogic RP Data head of research Tim Lawless.

The largest quarterly fall was recorded in Sydney, where dwelling values were down 2.3% over the final three months of the year, followed by Melbourne, where dwelling values were 1.9% lower. The only capital cities to show a rise in dwelling values over the December quarter were Brisbane (+1.3%) and Adelaide (+0.6%).

This was in contrast to the first three quarters of 2015, where capital city dwelling values rose by 9.3%, largely driven by a 14.1% surge in Sydney values and a 13.3% increase in Melbourne.  In stark contrast, the final quarter of 2015 showed Sydney as the weakest performer of any capital city, with dwelling values down by -2.3% while Melbourne recorded the second weakest result of -1.9%.

The complete 2015 calendar year results reveal a 7.8% increase in capital city dwelling values which is the lowest rate of capital gain over a calendar year since 2012 when values slipped 0.4% lower over the full year. Highlighting the diversity in the capital city housing markets, dwelling values fell across four of the eight capitals in the 2015 calendar year. The largest of these falls were recorded in Perth, down by 3.7%, and Darwin down by 3.6%. Hobart and Adelaide also showed subtle falls of 0.7% and 0.1%.

Despite the recent weakening of housing market conditions in Sydney and Melbourne, the two largest capital city housing markets still recorded much stronger annual gains than all other capital cities,  11.5% in Sydney and 11.2% in Melbourne. Dwelling values in Brisbane and Canberra were up a more sustainable 4.1% over the year.

Mr Lawless said, “The wealth created from housing in Sydney and Melbourne has been exceptional over the past twelve months.”

“In dollar terms, Sydney home owners have seen approximately $82,000 added to their wealth thanks to the strong capital gains over the year while home owners in Melbourne have seen the value of their dwelling grow by approximately $60,400. Brisbane home owners are $18,560 better off while Canberra owners have seen the value of their homes increase by approximately $21,900.”

“Home owners in the remaining capital cities have seen some erosion of their wealth via falls in the value of their dwelling. The largest losses have occurred in Perth where the average dwelling is now worth approximately $19,970 less than it was 12 months ago, while Darwin home owners have seen the value of their home shrink by a similar $18,150. The annual decline has been milder in Adelaide and Hobart, however dwelling values are still $515 lower in Adelaide over the year and down $2,430 in Hobart.”

“The slowdown in housing market conditions across Sydney and Melbourne in the last half of 2015 is being driven by a range of factors that can best be described as both organic and externally influenced. Organic market conditions have been derived from affordability pressures, rental yield compression and cyclical factors, while factors from external influences largely stem from a change in the regulatory framework introduced by APRA which has made it more expensive and difficult for investors to access housing finance. Added to this is higher mortgage rates and more restrictive credit policies and loan servicing requirements.”

Source: CoreLogic 

Looking to secure your next investment? Brisbane might be the opportunity you’ve been waiting for. Having solidified its reputation as a reliable and stable investment market, all while maintaining growth and ROI, Brisbane is a smart choice for local and international investors currently.

Contact CPS Property today to discuss your investment opportunities.