Living Off Investment Properties in Retirement

September 15th 2020 | Categories: Retirement | Home Loans & Leveraging Equity |

Retirement investment properties

There are several investment options that can form part of your retirement plan; these may include your superannuation, stocks, shares, bonds, cash and properties. Investing in properties has been a popular choice for Australians over the decades and is an effective way to diversify your retirement portfolio and reduce the associated risks. On one hand, it can provide you with a secure place to live in throughout retirement. On the other hand, additional properties could provide you with an income to live off once retired, given you have paid off the owing mortgage. So what do you need to know about including property investments into your retirement plan?


There are multiple factors that will help you determine your options for investing in property for retirement:

When do you want to retire?

Age is an important parameter to consider while planning for retirement. You need to consider the timeframe of your mortgage and how that works into your current stage of life. The average term of a mortgage is 25-30 years and the average age of retirement is 65.

Those still accumulating wealth and early in their working career will have a longer timeframe to invest and prepare for retirement. Your first property may serve as your family home in your younger years, and you may choose to build on your portfolio using the equity in your first home to purchase a second property.


There are currently additional government incentives making it more achievable for first home buyers to enter the market. You can read our full article on the rise of the first home buyer 2020 here.


If you are closer to retirement age at, say 55, your timeframe is shorter. However, property investments still pose plenty of opportunities. This is where a great financial plan comes into play, ensuring your investment aligns with your lifestyle, dreams and goals, and sets you up for your ideal retirement.


If you would like to discuss your options and how you might manage it from a financial perspective, please get in touch.

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How much do you need to retire?

The cost of living post-retirement also influences your investment decisions. According to ASFA, a single person requires about $27,814 per year for a modest lifestyle and $43,061 per year for a comfortable lifestyle post-retirement. On the other hand, a couple needs $40,054 per year to live modestly and $61,522 a year to live comfortably.

Being clear on your retirement dreams and goals and creating a budget will help you to determine exactly how much you need to live on each year.

You can find our free budget planner

You can find our retirement goals worksheet here.


The value of the property vs return on investment

If you plan to live off rental income to fund your retirement you will need to ensure the return of the property per year covers your cost of living.

You may consider investing in multiple properties of smaller value, or one property of larger value. By working with a real estate agent and a financial planner you’ll be able to determine what would work best for you; taking into account mortgage repayments, rental income, additional expenses, and expected capital growth.

If you plan to sell the property and live off the total, you’ll need to consider average life expectancy and making the money last during your retirement. Since the original purchase date, it is likely the value would have changed in some way, getting a property evaluation can help determine how much equity you have available on your home.


Additional expenses on your investment

When considering property as an investment, you should be aware of the additional costs on top of the initial purchase price. Investing in properties comes with multiple additional costs including insurance, council rates, property management fees, income tax and maintenance expenses.


You may be interested in our articles:

Ways to Live Off Properties After Retirement

Your timeframe, property value, remaining mortgage and personal goals and needs will all factor into how you decide to use your investment property into retirement. Some of the ways to live off investment properties are:


Rental Income:

You continue to retain ownership of the physical assets and generate an income by renting out the property. The properties can be rented out for residential or commercial purposes, or as vacation homes. There are also often significant tax benefits that come with owning a rental property.


Capital Appreciation:

If you have owned the property for some time or made significant home improvements, it is likely the property will have appreciated in value. Instead of renting out the property and living off the rental income, you may decide to sell the property, giving you access to built-up equity. You may decide to live off the total sum, reinvest in shares, downsize into a smaller property, or boost your superannuation.

Given the large number of factors including, property value, return on investment, timeframe and how you choose to live off your investment there is no one size fits all approach when it comes to incorporating investment property into your financial plan.

Investment properties can be a great addition for your retirement plan and have the potential to provide an income throughout your retirement. We recommend speaking with a financial planner who can help ensure your investment selection is suitable for you and your goals.


Our lending team can also help you review your mortgage to ensure it is the best for you.


Speak to us today to discuss your retirement options.

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What you need to know

This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.