Investment property: Should we buy with our $700,000 super?

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If you want to add a geared investment property to your retirement savings, here’s what you must think about.

Q: My wife and I are about to set up a self-managed super fund to purchase a geared investment property as a diversification strategy, following some financial modelling advice. We are both 52, with combined super in two Macquarie Wrap funds of $770,000 invested in Australian and overseas shares. We’d like to buy a medium-sized investment property.

Because property prices have been trending up, people assume this will continue, says Oliver, but investing in property is a lot more complicated.If you are unlucky and buy at the high end, you could find that six years later prices haven’t moved very much – and in fact have even gone down.Do your homework on property price trends in the area you plan to buy. Many people don’t buy investment property based on serious and detailed research but rather because the location is an area they know.

Interest rates staying high are risky for new property investors, says Oliver, especially if rents remain subdued – which they are these days, in particular for houses where they are averaging 2 to 3 per cent.

 

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