Investing during different life stages
Investing in property is a step that can be taken at virtually any stage of life. Here’s what you need to know to map out your investment journey.
First home investing
Your first step on the property ladder doesn’t have to be as an owner occupier. There can be compelling reasons to make your first property purchase as an investor. In fact, research shows as many as one-third of first-time buyers may choose an investment property rather than a home to live in.
Buying as an investor may mean you miss out on the First Home Owner Grant (FHOG) and stamp duty concessions. The flipside is that you can expect to earn rental income, and together with potential tax savings, this can make a rental property more affordable.
Of course, you’ll still need somewhere to live, and some first-time investors choose to “rentvest” – owning a rental property while also renting where they live. You’ll need to crunch the numbers to see how this fits your cashflow, but it can mean being able to live in your preferred suburb while still having a stake in the property market.
Investing for singles
Buying as a solo investor brings greater flexibility in your choice of property. It also means relying solely on your own borrowing power, which is shaped by your savings and deposit as well as your income, living expenses and other financial commitments.
Your income is especially important as a single buyer. You need to manage the investment loan plus the other ongoing costs of owning a rental place without having a co-owner to share them with.
It’s a good to speak with your Aussie Broker about your borrowing capacity to understand the type of property and location that you can afford to invest in.
Investing as a family
Pooling your resources and buying a rental investment with family members or even a partner can make a valuable difference to your purchasing power, potentially letting you invest in a better quality dwelling or more desirable location. It also means spreading the property’s cost across more people, potentially making it easier to cover regular outgoings like maintenance and repairs.
With more than one owner however, it is sensible to have a co-purchase agreement drawn up. This can set out how you will deal with a variety of situations including what happens if one person wants to sell their stake of the rental property.
Deciding how you will hold, or own, the investment property is especially important when there is more than one owner. Joint tenancy and tenancy in common are the two main types of property ownership. The former sees the property held in equal shares by each co-owner. Under a tenants in common arrangement, each person’s share of the property can be based on the percentage of the purchase price they chipped in.
The ownership structure is especially important for investors. When it comes to completing your annual tax returns, co-owners must divide the income and expenses of the rental property in line with their “legal interest” in the place. If you are all joint tenants, the rent and expenses are shared equally. If a tenants in common structure is used, the rent and costs are divided up for tax in the same proportions the property is held by each owner. Your tax professional can explain how this works in your situation.
Investment tips for seniors and retirees
Property investing is possible for seniors, and the rent you receive can provide a regular source of income, with the added potential to earn healthy long term capital gains.
While lenders cannot discriminate against a borrower on the basis of age, the term of an investment loan can be 25 to 30 years. If you’re aged in your 60s, this could see you still paying off a rental property in your 90s.
This explains why lenders may want to see an exit strategy – a plan of action that shows how you’ll manage your loan repayments in retirement.
It can be more challenging, though not be impossible, to secure an investment loan as a senior. Your Aussie Broker can explain the steps you may be able to take to start investing in property at an older age.
To know more about the right investment loan for your needs and life stage, speak with your Aussie Broker.
Navigate to the next article
Ready to keep learning?
Almost 30 years of home loan expertise, delivered to you monthly
Take the next step to buying your first home
- Chapter One : Things to consider before investing in property
- Chapter Two : Determining where to invest
- Chapter Three : Investment properties by dwelling types
- Chapter Four : Finance for your investment property purchase
- Chapter Five : How to invest in property
- Chapter Six : Adding value to your investment property
- Chapter Seven : Positive and negative gearing
- Chapter Eight : Getting your loan
- Chapter Nine : Selling your investment property