Dreaming of getting rich quick? Then property is probably not the best investment for you. Here’s another typical question:
My husband and I are both 47. We would like to retire at 50. I’ve got about 50,000 saved for retirement, and my husband has $90,000. We’d like to have at least $500,000 saved before we retire. What should our property investment strategy be?
Unfortunately, there’s no safe way to guarantee a $360,000 profit from property investment in any three-year period. Property is cyclical: the market rises and falls over time. It’s influenced by a huge range of factors, including world events, government policies, and local confidence. While it generally rises over the medium and long term, it can (and does) fall over the short term.
For example, Mark Bouris in the Sydney Morning Herald (9 June, 2013, Property investments need time) points out the Australian median dwelling price fell from $507,446 in 2010 to $491,000 in May, 2013. Short-term investors will have lost money over this period.
Long-term investors, though, will still make money. Bouris points out that in May 2008, the median price was $446,488: “That’s a rise of $44,512, or just under 10 per cent growth in five years – five years of global turmoil and financial crisis.”
Investors need to stay the course and ride the peaks and troughs to reap the rewards of medium and long-term price rises. Any property plan for a three-year period runs the risk of forcing you to either sell during a trough or delay your retirement. The longer you are prepared to stay in the market, the more you are likely to reduce your risk of loss and increase your chances to gain.