So you have hit 40. You have yet to buy a property for yourself to live in and you think your long term financial position is in financial ruin, right?
There are a number of ways you can accumulate wealth that doesn’t rely on property. And there are also strategies you can consider in the property market that you may have never considered.
As a mortgage broker, I am unable to give advice on financial strategies, but in general, other wealth creation tools would be shares (whilst volatile over the last 20 years, for every $1 that you had invested in 1996 would be now $3.13 today). Check out this website which goes through the history of shares and what your dollar would be worth now had you invested previously.
1. Saving and Investing your Spare Change
It’s often asked “how much money do I need to get into shares”. Usually, you would need to have at least a couple of thousand to get you started. Enter Acorns: a new concept in America coming to Australia. This is a novel approach to building up a little more savings which you can then use to purchase a bigger share portfolio.
2. Extra Superannuation Payments
Paying extra into superannuation can have some added tax benefits which the MoneySmart website explains really well. this can be an effective way to build up your superannuation as part of your overall strategy.
3. Self Managed Super Funds
Depending on how much you have in superannuation, you may also be able to buy property in your Self Managed Super Fund (SMSF.) Your SMSF would buy the property and you can obtain a loan to cover the difference between your savings (super) and purchase price. This is not for everyone but can be a way to accumulate property with no cash out lay from your savings (as the deposit is your superannuation balance!) There are some pros and cons with a SMSF and it can be costly. Your financial advisor will give you information to see if this strategy is suitable for you.
However I ask you to consider a couple of other strategies that recent clients of mine did providing great outcomes.
Kate (not real name) couldn’t afford to buy in Sydney on her own. She was keen on property. Her flatmate of 6 years felt the same. They felt that they had the ability to create a good business relationship and purchase an investment unit together. They needed $20,000 each to get in to cover the purchase. The did some very minor improvements themselves (paint, new curtains and carpet) and they now have a sense of ownership that they are helping each other to pay off this property. The thought of doing this on their own was too overwhelming, but this strategy was very motivating to each other and has been a really positive experience.
5. Investment Property into Your Retirement Plan
Another consideration, think about where you want to live in retirement. Perhaps your investment property could be your retirement property. Having any old investment property can be uninspiring. But having someone else pay off the mortgage for your retirement plan could be that motivating factor to get you to “tick”. Clients Philip and Jane did exactly that. They have bought up on the Tweed River near Byron Bay. 3BR house under $400,000 right by the river. This is rented and for a small deposit they have a property where they will live in about 20 years time.
Sometimes purchasing in your immediate circles may not be feasible and purchasing an investment property “just because” can be uninspiring. But if the purpose of the property purchase like the scenarios above tick your values and motivates you it can be that way of getting some wealth in a way you may have never considered before.
By Nicole Cannon
A mortgage broker with a difference having won awards for ethics, social responsibility and community engagement. Find out more about her, here.
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