Jun 3, 2021 7:50:55 AM

Managing Property Investment into Retirement

Topics: Selling, Retirement, First Home Buyer 2

Nearing retirement age often leads to a mindshift in our view of property investment. The closer we get, the less appetite for risk we typically have, and the more cautious we become about ensuring our retirement savings go the distance. So, what are the main risks retirees need to consider when reassessing their property investment strategy? And what could they do to minimize risk and ensure they plan ahead for longevity?

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Asset rich, cash poor

For many people entering retirement, much of their wealth is held in the family home or investment properties. And while they may own property worth a lot of money, they can’t necessarily use that property to easily access cash. 

If you’re in a position of being asset rich and cash poor, downsizing to a smaller home could help you unlock the value held in your home, to free up cash to be used for day to day expenses. For many, this is an ideal solution as they no longer need a big house and there’s less upkeep needed in a smaller home.

But if downsizing isn’t an option for you, a reverse mortgage could provide the much-needed cash you need to survive. A reverse mortgage lets you mortgage your property so you can access your equity with no repayments required until you move out. Before choosing a reverse mortgage, it’s vital you get sound financial and legal advice.

Managing rental properties

Property investment in retirement can be beneficial. As rental income comes in week after week, your mortgage is reduced and your equity grows, providing further investment opportunities and the ability to leverage. Once you’re mortgage-free, your rental earnings provide an additional source of income and offer tax benefits too.

Managing rental properties is a big undertaking. As a landlord, you take on the responsibilities and extra demands of owning a rental property. Unless you engage the services of a property manager, you’ll have to find tenants, check references, collect the rent, fix problems, and deal with vacancy issues.  

When reassessing property investment strategy in retirement, it’s important to pay careful attention to how much involvement you’re willing to have in the day to day operation of managing rental properties. 

Entering retirement with a mortgage

One in five Kiwis will retire with a mortgage*, recent data shows. This is largely a result of rising house prices, as homeowners are forced to take out bigger mortgages to get into the market.

Added to this are those parents who remortgage their own home to help their children into the property market. It’s not surprising that the number of people retiring with mortgages remains on the rise. 

Reducing debt to manageable levels is vital when it comes to retirement planning, as is regularly reviewing your mortgage to ensure you’re getting the best rates possible.

The earlier you begin planning for retirement, the more prepared you’ll be when you do retire. To find out more about reverse mortgages or refinancing, get in touch with a Mortgage Express mortgage adviser today. 

* https://www.centrix.co.nz/new-data-shows-one-in-five-over-65s-managing-a-mortgage-into-retirement/