Leveraging your savings to invest in property at an early age is a widely accepted wealth strategy, but is it ever too late to invest?
Peter Koulizos, chairman of the Property Investment Professionals of Australia, said it was never too late to buy a property, but the question comes down to â€œhow old is too old to borrow to start investing?â€
â€œIf you are 70 years of age, you are going to find it very difficult for anyone to give you a 30-year loan to buy an investment property,â€ Mr Koulizos told Smart Property Investment.
â€œIf you are looking to retire on a, one assumes, lower income than youâ€™re on now, it is going to be very difficult to be paying off a, what is going to be in the main, a negatively geared property.â€
â€œIf you make a mistake, you donâ€™t have a lot of time to make up for it, unlike if you were buying at 25 or 30, so you need to get very good advice from a very good property accountant.â€
However, older investors are likely to have a bigger stockpile of super, which can be used to purchase an investment property.
â€œIf youâ€™ve got your super, youâ€™ve got [$500,000 or $600,000], you donâ€™t want to just be living off that [$500,000 or $600,000], that capital,â€ Mr Koulizos said.
â€œYou can buy an investment property and live off the rent and hopefully if youâ€™ve bought the right property in the right suburb, that property goes up in value, so rents go up in value over time, and then there might come a time where [$500,000 or $600,000] turns into a $1 million property, and then youâ€™ve got even more to retire on.â€
In Mr Koulizosâ€™ opinion, the cut-off age for borrowing to start investing is past 60 years of age.
Looking back, slightly earlier at 50 could be a smart move, Mr Koulizos said, as at that age, Australians typically have a solid income and no dependents.
â€œYouâ€™ve got a pretty good disposable income, so youâ€™re going to look pretty good to the banks at the age of, say, in your 50s, compared to, say, somebody in their 70s,â€ he said.
However, like any investor, the strategy being implemented will be different depending on what their goals are, which Mr Koulizos splits into three groups: looking to buy a property at 50 and sell at 60, buy a property at 50 and live off the rent, or buy a property at 50 with the intention of living off the rental income and retiring at 55.
â€œIf youâ€™re buying from 50 to sell at 60, then capital growth is really important, then location is really, really important in your buying decision,â€ he said.
â€œIf youâ€™re buying a residential property at 50 with the idea that youâ€™re going to start living off the rent in your late 60s and 70s, then location is not as important, because itâ€™s more rental return.
â€œIf you want something with a great rental return from day one, then you should probably forget about residential property and look at commercial property.â€
Mr Koulizos added that those in their late 50s might want to consider buying property with their self-managed super fund, which he called â€œa great ideaâ€.
â€œI generally wouldnâ€™t encourage people in their 20s to do that, but in your late 50s, it could be a great idea,â€ he said.
Sasha Karen, Smart Property Investment, 26 April 2019