31/08/2016. Multifocus Properties & Finance
Have you ever sat down and really thought about how much wealth and income you will be living on in retirement? How much do you need to be comfortable?
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
The reality of the situation for most people is that their superannuation balance is most likely not going to get them where they want to be in terms of financial comfort and security – at least, not with any real quality of lifestyle.
For many people when they look ahead, they can see that their super balance isn’t going to cut it. I often hear from clients who are confused about what to do, as they know they need to do something to secure their financial future – but they are not sure what steps to take.
There are many wealth creation models you can choose from to increase your personal finances and for some, they believe the answer lies in diversification. They like to spread investments between super, shares, property and other investments such as bonds and index funds. While diversification does have many benefits from a risk mitigation point of view, it can also have its drawbacks.
In my view, real estate is one of the most flexible, sustainable and rewarding investment classes, as property can offer many benefits that super and shares cannot. These include:
Growth and predictability
There is a very big difference between the investment timeline of shares and property. With shares, the peaks and troughs are much more dramatic as they can be bought and sold over short-term or long-term periods, with you reaping the benefits or the losses as you go. However, property investing is far more predictable: you are most likely to experience capital growth over time, with a steady and ongoing rental income, and tax benefits and rebates (if negatively geared) along the way.
Autonomy and choice
Unlike superannuation, which you are forbidden from accessing (except in extreme circumstances) until you retire, property investment is completely within your control. You have the freedom to buy, sell, renovate, borrow and basically exercise control over your entire investment, without being constrained by ever-changing rules and legislation.
Overall, the property market consists of roughly 70% owner-occupiers to 30% investors, whereas shares are 100% owned and traded by investors. This creates a very different economic risk profile; shares are considered the most volatile asset class to invest in, while property is considered less liquid, but also far less risky.
These are just some of the differences between these distinct asset classes and, in truth, there is no ‘right’ or ‘wrong’ investment choice. There are, however, some assets that are better investments for you and your personal situation, which is why I generally suggest my clients consult a financial planner. They can analyse your current situation and forward-project where you are likely to end up, in terms of:
How much money you have in superannuation today.
How much you are likely to contribute throughout the rest of your career.
How much you should salary sacrifice, if possible, to increase your super balance.
The annual income you desire in retirement – and whether your current superannuation journey will get you there.
Regardless of what assets you invest in, one thing is certain: when planning for your financial future, you need a clear idea of where you stand now so you can put in place a clear strategy to get you where you want to be. My belief is that investing in bricks and mortar, and building a property portfolio, is a positive step towards a more secure financial future.
For further infromation contact Multifocus Properties & Finance. Ph: 1300 266 350 / www.multifocus.com.au
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