Investment properties now

by Carol Waterhouse
(Perth)

We have 3 investment properties which have taken a considerable hit in the market downturns. We have sold 2 just recently so now we will have to pay off the outstanding bank balance. The remaining unit has a tenant but once again it’s gone down in value, so in your opinion do we keep it and pay the balance down or sell. We are 58 and 60 years and want to get everything in line for retirement.

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Jun 30, 2019
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by: Mike

Hi Carol,

Thank you for your question. We need to highlight that we cannot give specific financial advice as we don't know your full circumstances and it is best to speak to your own advisor on your own situation.

That said, there are a couple of things worth thinking about. It sounds like you still have some mortgage debt outstanding and paying off debt is frequently a good de-risking option. Things to consider when repaying the debt are the amount of debt (or equity in the property) and the terms of the debt (the interest rate, the repayment terms, etc).

If you do sell your property then you'll need to consider what else you'd invest in. Can you replace the rental income easily? Other options could include a diverse portfolio of stocks/LICs/Index Funds etc (that pay dividends), bonds (that pay coupons), cash (pays interest) or other property.

It is very important that you understand that pretty much all asset classes can (and do) go down in price from time to time. Clearly the Perth property market is doing that right now but stocks, bonds, property, can all be quite volatile in price as well. You need to be aware of this and try to build some investment income that is likely (but not guaranteed) to be more stable than moving asset prices. Diversifying your sources of cashflow is also important to try to protect yourself from things going wrong.

Cash (or savings) shouldn't go down in nominal value (assuming you deposit it with a safe bank) but it can very much go down in REAL value (value after inflation). Inflation is something you'll also need to think about over the long term.

We're aware this comment is not specific but we simply can't give you direct advice. We hope at least you consider your options carefully and look to act in a rational manner that are likely to give you reasonable risk adjusted over the long run. Good luck!

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