Are we too old to buy a few investment properties?

My husband is 56, and I am 50. We have a debt free home worth $650,000 and have around $300,000 each in super and some savings, I have a few shares. We are late starters to investing but wonder if it is too late in life to buy one or two investment properties.

It’s never too late to start, but it’s important to adopt a strategy that will not maximise any risks because you are now at a stage where it’s difficult to recover from a setback.

While it’s never too late to start investing, there are a few crucial considerations to keep in mind before you buy an investment property.Credit: Simon Letch

In my experience, investment properties are not a good investment for people in the later stages of their employment career. Success in real estate depends on being able to find an undervalued property to which you can add value – that’s hard to do these days and almost impossible to do if you buy an apartment.

Furthermore, you are at the mercy of interest rate rises, and you will find your costs may increase faster than rents as years go by. Then, if during your retirement you wish to take some money out of the property portfolio you need to sell the entire building and pay capital gains tax. You can’t sell the back steps.

I suggest you focus on making the maximum tax-deductible contributions to super and plan your future so you stay in the workforce for enough time to let compound interest work its magic.

For example, if you had $500,000 in super and retired at age 60, all you would have is $500,000, but by putting off your retirement to 65 you’re super should increase to $800,000. That’s the most effective and risk-free strategy I know.

I can’t seem to find a straight-forward answer to my query – are personal contributions to my super tax-deductible? My employer deducts the maximum amount from my pre-tax salary, and I was hoping to contribute more after-tax salary to my super whilst hopefully getting a tax deduction at the same time.

Any personal concessional contributions you make will be tax-deductible. Just keep in mind there’s a limit of $30,000 in a financial year and this includes the employer contribution.

For example, if your employer was contributing $11,000 you could contribute no more than an additional $19,000. Don’t forget to complete a notice of intent to claim the contribution.

I am not sure how the ATO treats the costs of owning a rental property. Are land tax, repairs, insurance, interest on loans, and capital expenditure tax-deductible? What exact repairs and maintenance costs can be included? If some of these are allowable and are carried out by the owner can a labour rate be applied to this?

Julia Hartman of Bantacs says the holding costs of a property can be included in its cost base as long as the expense has not otherwise been claimed as a tax deduction and the property was purchased after 20th August 1991.

Holding costs cannot be used to increase a capital loss on a property. The regulations specifically list interest, insurance, rates, land tax, repairs and maintenance. The word maintenance has been tested in other areas to even include cleaning and maintaining the lawns and gardens. You cannot include the value of your own labour.

As a couple, we own our home and receive the full $1682.80 pension a fortnight. What is the maximum we can have in the bank including term deposits before our pension is reduced?

There is no simple answer to your question. You are tested on both your assets and your income and these assets include items such as furniture, cars and caravans. Furthermore, if you had $300,000 in financial assets they would be given a deemed income of $180 a fortnight.

The point at which the pension starts to reduce is $470,000 for assessable assets for a homeowner and $9 672 a year for a couple under the income test. There are calculators on my website which will enable you to do the numbers.

Just make sure personal items such as cars and furniture are valued at garage sale values not replacement values.

Noel Whittaker is the author of Wills, Death & Taxes Made Simple and numerous other books on personal finance. Email: [e-mail]

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.