It Always Seems Impossible Until It Is Done
Sadly there is a growing trend of older women entering retirement in poverty, but steps taken towards strategic investment can mean security is no longer an ‘impossible’ dream. There are many factors why women in this age group are becoming more economically vulnerable, with a low superannuation balance and minimum earning capacity doubling your chances of financial distress. Over the past 18 months I’ve worked with Susan, a 54-year-old woman who recognised the alarm bells going off and knew she had to do something immediately to shore up her financial situation. She wanted to buy her first investment property but was unsure whether she could do so - and until it was done, she thought it would be impossible.
Never too late to change your future
Single and always in lower paid jobs, Susan had managed to save a deposit for a modest apartment in Sydney’s inner west, where she’d lived for the past two decades. Several years ago, she wanted to get a more highly paid job so she went to university part-time and became a qualified psychologist. Like many women of her age, Susan had virtually no superannuation and for her, the ‘impossible’ dream was to buy an investment property so that she’d have some financial security in retirement. A woman of action, instead of trying to fill her savings gap with cash, Susan decided to use the next 15 years of income to build an asset base through real estate investment. She wanted to start her portfolio using equity from her apartment and contributions from her income, which would be topped up by rent once investment was tenanted. We looked at what she could borrow, the strategies required to find the right property (and whether she could buy another one in time), who could help as a mentor throughout the process and what she wanted as the end result.
Setting her target towards the right property
Susan had a very well-defined goal: “I want a house on land in or near a large city with positive cash flow.” She was pre-approved for a $430k loan and I searched the country using disruptive technology to source property matched to her needs. Of these, Susan selected a four bedroom house with two bathrooms and a double garage house on a 625 square metre block of land. The property was situated in a large city, close to schools and shopping centres, just minutes from a large hospital, with existing tenants paying $390 per week in rent. The pest and building inspections revealed the five-year-old home had been well maintained and on that basis, Susan had no hesitation in moving forward. This particular property was appraised by the software technology at $419k and listed at $409k, but we successfully negotiated a sale price of $385k ($24k under the asking price and $34k under the appraised price). We also ensured Susan had a cash buffer in place should she find her financial situation changed at all into the future.
The difference a year can make
Fast forward 12 months and Susan has just received word from the property manager that the incumbent tenants are leaving and new tenants have signed up to pay $430 per week. Susan immediately made an appointment with her broker to see how much she could now borrow to increase her portfolio. The growth of both her principal place of residence and first investment mean she’s been approved for an additional $250k loan. Susan has now advised me to find her a positive cash flow property - and the difference this time around is that she doesn’t think the task is “impossible”. Regardless of where you are financially, Susan’s example shows that it is possible to improve your situation with immediate impact on your economic wellbeing. Susan’s determination has altered her life path with a new career in the mix - a shining example of how there’s always time to make a difference.