Leveraging your savings to invest in property at an early age is a widely accepted wealth strategy, but is it ever too late to invest?
Peter Koulizos, chairman of the Property Investment Professionals of Australia, said it was never too late to buy a property, but the question comes down to “how old is too old to borrow to start investing?”
“If you are 70 years of age, you are going to find it very difficult for anyone to give you a 30-year loan to buy an investment property,” Mr Koulizos told Smart Property Investment.
“If you are looking to retire on a, one assumes, lower income than you’re on now, it is going to be very difficult to be paying off a, what is going to be in the main, a negatively geared property.”
“If you make a mistake, you don’t have a lot of time to make up for it, unlike if you were buying at 25 or 30, so you need to get very good advice from a very good property accountant.”
However, older investors are likely to have a bigger stockpile of super, which can be used to purchase an investment property.
“If you’ve got your super, you’ve got [$500,000 or $600,000], you don’t want to just be living off that [$500,000 or $600,000], that capital,” Mr Koulizos said.
“You can buy an investment property and live off the rent and hopefully if you’ve bought the right property in the right suburb, that property goes up in value, so rents go up in value over time, and then there might come a time where [$500,000 or $600,000] turns into a $1 million property, and then you’ve got even more to retire on.”
In Mr Koulizos’ opinion, the cut-off age for borrowing to start investing is past 60 years of age.
Looking back, slightly earlier at 50 could be a smart move, Mr Koulizos said, as at that age, Australians typically have a solid income and no dependents.
“You’ve got a pretty good disposable income, so you’re going to look pretty good to the banks at the age of, say, in your 50s, compared to, say, somebody in their 70s,” he said.
However, like any investor, the strategy being implemented will be different depending on what their goals are, which Mr Koulizos splits into three groups: looking to buy a property at 50 and sell at 60, buy a property at 50 and live off the rent, or buy a property at 50 with the intention of living off the rental income and retiring at 55.
“If you’re buying from 50 to sell at 60, then capital growth is really important, then location is really, really important in your buying decision,” he said.
“If you’re buying a residential property at 50 with the idea that you’re going to start living off the rent in your late 60s and 70s, then location is not as important, because it’s more rental return.
“If you want something with a great rental return from day one, then you should probably forget about residential property and look at commercial property.”
Mr Koulizos added that those in their late 50s might want to consider buying property with their self-managed super fund, which he called ‘a great idea’.
“I generally wouldn’t encourage people in their 20s to do that, but in your late 50s, it could be a great idea,” he said.
Sasha Karen, Smart Property Investment, 26 April 2019