If you’ve worked hard to establish yourself in your career, to build up your business, or generate additional sources of income, you may be at the point where you are considering the next steps in your financial journey.

At some point you are going to reach a ceiling of your individual earning potential- you can only work so many hours a week, you can only earn so much money in those hours.

If your income exceeds your expenses, and you have capital that you can afford to invest, choosing the right investment opportunity is vital.

The change in retirement goal strategies

The overarching goal of investors seems to have moved away from the idea of saving up enough money for you to live on during your retirement, and instead tilted more towards purchasing investments that can offer a passive income (money coming in that you aren’t having to work to receive).

This means that instead of trying to work out how many years you will have in retirement- and making sure there is enough money to cover your costs during those years- you have opted to make intelligent investment choices earlier in your life which have resulted in a regular income that will potentially never run out.

So why property?

Investing in real estate offers many additional benefits for investors. Apart from property being one of the lower risk investments, it also offers the potential for generating equity which can then be used to acquire additional investments.

Investment properties also come with significant tax deductions from mortgage interest as well as depreciation. Capital growth means that assuming you have chosen the right location, you can confidently expect that value of your property to increase over time.

Your investment property can generate rental income that can help you pay off that investment. You also have the option to sell your investment property at a profit if it is more beneficial for you than an expected rental income.

Choosing the right property

This is often the part that investors can find difficult, especially if they do not have a comprehensive understand of the property market, prices, and expected ROI. As a rule of thumb there are some general considerations that will help you make your choice.

Firstly, look for suburbs that are expected to grow, that have good infrastructure, and have a strong rental demand. Secondly, avoid overcapitalisation- that is, spending too much money on an investment through unexpected costs, or trusting the sometimes overly optimistic projections of sellers without crunching the numbers yourself.

Lastly, you want to find a property that will offer you the greatest possible returns for you investment, and therefore can pay itself off sooner. Properties that allow for the generation of two rental incomes rather than one, such as our dual key/dual occupancy homes, are a great example of this.

In summary, you want to think big picture- one investment may not result in the required amount of passive income. A long term plan to grow your portfolio in conjunction with advice from your financial planner is an intelligent strategy. Remember- the sooner you start investing, the more time you give your investment profits and reinvestments to snowball.