Last week we started looking at how Property investing for the first time can seem like a big leap into the unknown. With no experience, the big leap into real estate investing can seem risky, however, with the right knowledge and support behind you it really isn’t as hard as it may seem at first. How soon should people start to do something about investing? What do you do when you don’t know what your financial future looks like?
In today’s Part 2…we look to the future and how to bridge the gaps.
Projecting the future
“Next, we try and do a projection of where they will end up financially if they stay on the same course they are now. We can do some of these projections using tools like the MoneySmart calculators on the ASIC website. These tools are freely available to everyone and are quite good to use for things like property and other kinds of investments as well. By plugging-in some assumptions about rate of returns and growth, for example, it is possible to gauge where clients will likely be financially at age 65.”
“This projection will also help you get an idea of what sort of income-stream you are likely to have in the future. From this, it comes down to questions about the kind of assumptions you are making. To refine this picture we will ask further questions like; when is someone hoping to retire, do they want to leave some kind of legacy for their children and grand-kids, and are they looking at taking some big holidays when they finally have the time in retirement. You want to plan these kinds of things into the picture of someone’s financial future.”
These kinds of questions, says Hamish, help to find out some of people’s hopes and dreams for the future. After all, life is not only about striving but also about enjoying the journey along the way. These joyful times also need to be planned for when advisors are helping people to figure out what their financial future looks like.
Understanding the gap
When the kind of future someone is facing is shown to them it is possible to understand where the gaps are between where people’s projected future may end up, and the kind of future they would really like to be living.
“A classic example is the case of a young couple, both in their mid-30s, who may bring-in a combined income of around $130,000. When you look at their projections they will be earning approximately $50,000 from their superannuation in retirement. As you show them this, they realise that at some point they will need to significantly cut back on their spending just to live.”
“While in retirement they might not have their kids with them and the mortgage is hopefully paid-off, they will also be spending more on different things like going on holidays and recreation. For example, when men retire, they’ll often take-up a hobby or like to play golf. All of these kinds of things need to be considered.”
Investing in property – a strategy to bridge the gap between hope and reality
Hamish says that property investing has been one of the most popular ways in which people can bridge the gap between where they’d likely be if they did nothing, and the financial future they can have if they plan and take some action to get to there.
“The first rule about investing is that not all kinds of investment are right for everyone. You need to match the investment to the person. Some people don’t like shares because they perceive them to be too volatile and risky. Others may not like property investing because they worry about what happens if they don’t have a tenant for a period. Every type of investing needs to be well planned, and when you take people through the exercise, property investing can come out very favourably.”
“Property can generate capital growth, meaning that the value of your investment property will grow at the same time you are earning an income from it. This feature of property – that you can have an income stream – makes it very attractive for many investors. It’s not for every investor, though there are many real estate investors who are able to reach their retirement income goals thanks to property being a part of their investment strategies.”
As with any investment decision, Hamish says it is important to do your research and get the best quality advice before making critical decisions. By investing in good advice your financial outcomes can be vastly superior to trying to tackle it alone.
Are you considering investing in property?
Behind every great investor is a great team. Give Vision Property & Finance a call on 1800 004 663 or contact us to get the best team supporting you. Or read more on how we can help you with your Property Investment journey here.
Did you miss Part 1? Read it here…