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Maintaining Cashflow in Retirement

While many of us dream of the day when we can leave the workforce behind, far fewer dream of how we are going to keep ourselves afloat. Planning for retirement may not be high on everyone’s to-do list, but thinking about your exit strategy from paid work is best done well in advance.

One major consideration facing most retirees is how to maintain cashflow. After the regularity of a pay check, the thought of having to eke out a lump sum super payment can be daunting. Finding ways to transform cash assets into cashflow becomes an important part of ensuring retirement savings can go the distance.

Property is always a popular choice. The practicality and physicality of bricks and mortar can provide a sense of security, and the income generating aspects of property (through rental income) is well-known and easily understood. However, it’s not always as simple as purchasing a property and getting a renter tenant in. To ensure cashflow over the life of the property, it needs to have a few key features.

Firstly, it needs to fit your budget. There’s no point over-extending yourself to purchase a particular property that you can’t really afford, even if you do really love it. The point here is to generate income from cashflow, not put a strain on yourself with expensive repayments.

Secondly, it should be in an area with high rental demand. Long periods of vacancy while your property sits waiting for tenants can really gouge away at your cash, and can seriously compromise the benefits and viability of your investment.

Finally, it should offer long-term stability. Great if you can find something in an area that is starting to experience growth, however this will not always be possible. Do your research here and look at the local area – are there schools, shops, transport? Does the area depend on one particular industry or sector, such as mining or manufacturing? Consider what may happen if these were to wind down.

One investment option that doesn’t always spring to mind is serviced apartments. While quite different to residential real estate, serviced apartment investments can offer those in retirement a range of benefits that can enhance their lifestyle, without a lot of effort.

Serviced apartments are available in a range of locations around Australia, at prices to suit most budgets. Currently available properties are listed on-line, making it easy to search through your options. Associated costs are also listed, allowing you to easily forecast your budget, and income.

Some serviced apartment operators also look to different methods to select locations for their properties, and don’t necessarily align their sites to what’s popular in the residential real estate market. Quest, for example, the largest serviced apartment company in Australia, uses a model based on business travel, to capture the corporate travel market and provide a ‘home away from home’ for those on the road.

Finally, a serviced apartment, once purchased, is leased not to an individual, but to a company who then lease your apartment to use as a hotel room. This lease is long-term – usually five years, with options to renew – which provides stability and peace of mind for investors. No loss of income due to vacancy either, as the investor earns their rent regardless of whether there is anyone staying in the apartment. The third party company rents out the room on a per-night basis, like a hotel, and pays a monthly rent to the owner.

For retirees looking to ensure they maintain cashflow once their salary winds up, serviced apartments can offer an affordable, low-stress and long-term option.