Why Retirees Shouldn’t Invest in Property

Investing in property is a popular means of building wealth for retirement. Typically, keen property investors will build a portfolio of properties using borrowed funds in the expectation that the increase in value of the properties over time will allow them to sell off one or two at retirement leaving a portfolio of properties with no debt. The rental income from the properties, less expenses such as rates, insurance and maintenance, then produces an income for retirement.

While this all sounds good in theory, there are a number of factors which make property a less than ideal source of retirement income.

Many people live for twenty or even thirty years in retirement. Investment property held over that period of time usually requires expensive maintenance such as painting, roof repairs and replacement of floor coverings. Financial pressure can result unless provision has been made for these expenses. Income from property is not constant, as there are often periods between tenants when the property is vacant and occasionally tenants do not pay or cause damage to the property. Being a landlord, even if you hire a property manager, is not fun if you are in poor health or in your late retirement. As well as the hassles of dealing with tenants and maintenance, there is also the need to keep records of all income and expenses and to prepare an annual tax return.

Perhaps the most compelling disadvantage of investing in property in retirement is that although it produces an income, it is difficult to access your retirement capital. Unless you have a desire to leave a large inheritance for the beneficiaries of your estate, it may be better to sell your property and invest in liquid assets that can be gradually spent for your enjoyment over the course of your retirement.