Docstoc

The Risks of Superannuation Investment Property

Document Sample
The Risks of Superannuation Investment Property Powered By Docstoc
					                 The Risks of Superannuation Investment Property

Superannuation investment property is often sold to people as a low or no risk option
for funding their retirement, yet is that really true? Surely, if the last few years have
taught us anything, it is that the housing market is far from risk free. Certainly,
traditional approaches to putting money into it are both limited and likely to net you a
far lower return on your initial outlay than you thought. Here’s why.

Firstly, regardless of what you are told when you are thinking of signing up,
fluctuations in the market do matter. Yes, there is a general trend towards higher
prices over time, but that does not automatically translate to a profit in your specific
case. The quality of the property still matters, as does demand from both buyers and
the rental market. If prices contract and you can’t ride out the slump, you could lose
money.

Secondly, you need to be aware that the costs are often considerably higher than they
first appear to be. Think back to the last time you moved house. How many costs were
there beyond the initial price of the property? There were fees for estate agents and
solicitors, taxes to pay, and a host of hidden costs that you will have to cover every
time you purchase an investment house or apartment. You will also have to pay many
of them again when you come to sell it on. If you choose to rent the place out in the
meantime, you will have to pay a management company to collect rents and cover
repairs, put up with any trouble from the tenants, and cover any ongoing costs.

You might think that you are protected from this sort of thing if you sign up to a
negative gearing based scheme, but think again. Negative gearing only works in
periods of market growth, because it depends on rises in the value of the property to
set against costs. Should the market contract, and we know that it can, you are left
having to fork out money you often can’t afford. In the worst cases, you end up
having to sell at precisely the worst time to do so.

So you have to be careful, but it’s not like there are any alternatives, are there?
Actually, yes, there is at least one other option. It’s an approach that still lets you earn
money from the value of houses, but which sets out to avoid putting you in the
position of ever owning them.

Instead of the usual approaches to superannuation property investment, where you
hang onto the house in the hope that things go well, this way, you put yourself in the
position of helping to finance the purchase for others. You avoid all of the usual costs,
get a rate of return that you are aware of from the start, and don’t find yourself
saddled with a house you can’t sell. Put like that, doesn’t it sound like a much better
option for your money?

And now I’d like to give you more insights into the alternatives to superannuation
investment property that can offer you better financial results, just get FREE access to
Greg J. Hamlyn's Investment Consumer Guide (value $47). You can access this
consumer guide by clicking or visiting: http://www.firststephomes.com.au

				
DOCUMENT INFO
Description: This article provides you with more insights into the alternatives to superannuation investment property that can offer you better financial results.