A common question from those looking to invest in property is: “What is the best age to start a portfolio?”
“Twenty years ago” is a popular retort, and fair enough when you consider how much property values have increased over that time. But until time travel becomes possible, let’s put that advice to the side.
Two more practical answers are “as soon as possible” and “when you’re young”.
While age should not be a barrier to property investing, the majority of advice does point to that fact that it is best to start investing when you are younger.
Here we’ll look at why this is and if property investing is still possible for those at or approaching retirement age.
Why younger is better for property investing
Property is considered to be a long term investment; the longer you hold it for, the better the investment and the more returns you can make from it.
Considering most mortgages are twenty to thirty plus years, it makes sense to start as young as possible to pay the mortgage off and then have a decent timeframe to make greater gains without any bank repayments.
And keeping in mind the rising value of property in some markets, there are some impressive returns if you keep an investment property for forty or fifty years.
Those in their twenties or thirties also have the benefit of time, which is a key element in property investing.
Time gives investors more opportunity to build a portfolio of multiple properties if they choose, boost income significantly and be set up for a comfortable retirement with passive income, if all goes according to plan.
In addition, younger people are typically more flexible and have less commitments to provide for a family, or other financial obligations. They generally take more chances too, which could pay off in a big way, but they also have time to make up for it if an investment goes wrong.
Finally, starting young gives the investor ample opportunity to take advantage of several full property cycles, which generally last seven to ten years.
This gives them time to ride out any lows, experience several upswings and dispose of the property at a time that will most benefit them, if they choose.
However, age should not be a barrier for property investment and there are certainly benefits to gain for those beyond their twenties and thirties too.
Sometimes it just requires some extra considerations with thorough planning and strategy to make it work.
Investing in your forties
If you’re in your forties there is still plenty of time to invest and build a nest egg for your future. In fact, a lot of first time investors are in their forties these days (it is the new thirties, after all).
There are some advantages that investors in the forties have over their 20 year old counterparts. They have the benefit of experience and typically have a more stable lifestyle that can better allow for the constant expenses and attention required for investing in property.
Generally speaking those in their forties still have twenty to twenty five years left in the workforce, which is enough time to pay off a mortgage. And considering how much house prices can rise in twenty years alone, significant gains can be made in that time to contribute positively to retirement.
Investing for the over fifties
If you’re in your fifties there is still enough time to purchase a property and see out a full property cycle, meaning you can still benefit from investing in property.
As you head into your late fifties and sixties, things start to get a little trickier for first time investors, and property becomes a riskier investment, meaning a few more factors need to be considered.
First of all, property is a long term investment and the investor should consider realistically what gains can be made in the time they will likely hold the property for.
It may also be harder to get a home loan at this this age, as many banks will question how much longer you have in the workforce and if you will be able to pay off the loan without a steady working income.
If you are already retired, investing in property is still possible, but there are a few things you must carefully consider.
The first port of call for an investor at or approaching retirement age should be to consult a financial advisor. They can help you see if it is the right investment for you, and if so, develop a specific investment strategy with realistic goals and a plan of how to achieve it.
Furthermore, they can help you navigate the murky waters of tax and superannuation, where the rules change and become more complex upon retirement.
If you have accounted for all these factors and decide that property investment is the right choice for you, there are a few things you might want to consider to be a more appealing prospect to lenders.
This might include a larger deposit to avoid lenders mortgage insurance and a shorter term loan if you are able to finance it.
You should also have a clear exit strategy of how you will eventually dispose of the property.