Should I buy an investment property, or upsize my house?

I am 52 years old and single. I own my studio apartment and have $400,000 in super plus $40,000 in savings. I expect to make around $120,000 this financial year, though I’d like to work a bit less. I can save, though my income is a little variable as I am a casual. Should I buy an investment property or buy a larger unit for myself? I’d like to move at some stage, but I’m happy where I am for now.

Congratulations on getting yourself into a solid financial position. Regarding the two investment options you are considering, I think you might be putting the cart before the horse here.

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

Start by taking some time to determine your goals. You’ve hinted here that you might want to work less, so perhaps one of your goals is to cut back your working hours. Is there a particular age you would like to have the option of retirement?

Perhaps there are other things you’d like to do, such as travel, study, or take up a new hobby.

Once you have clarity around your goals, you can formulate an investment strategy using your savings capacity. Such a strategy may entail borrowing and purchasing a property, but it may also involve making extra contributions to your super, or building an investment portfolio outside of super that you can access before retirement. Embarking on a strategy that doesn’t require borrowing could be desirable given the variability of your income.

Property transactions entail a lot of costs – stamp duty, conveyancing, and then selling costs at some point in the future. You therefore want to try and avoid any short-term or unnecessary property purchases.

Given you’re quite happy in the unit that you are in currently, I would suggest you stay put. Perhaps you re-evaluate at the point of retirement, when you might have more flexibility as to location.

I’ve just inherited my parents’ home, which I have always lived in, a $50,000 car and $400,000 cash. I currently receive a part-age pension but expect to lose it once the estate is settled. I’m 72 in June, single, and have $650,000 in super with no debts. At my age, can I put the $400,000 into super and then generate income to replace my lost age pension?

As you are under 75 years of age, you can add to your super via an after-tax (non-concessional to use the jargon) contribution. Note, however, that the maximum you can contribute per year is $120,000. You could get your full $400,000 in by spreading your contributions across two financial years and using bring-forward provisions in the second of those years.

With this addition, your superannuation will throw off income of approximately $4375 per month. You could afford to draw a little more, if required, provided you are not too conservative with your investment selection.

I am a carer for my elderly mother and receive a Centrelink Carer’s payment and Carer’s Allowance. I am 57 and unemployed since 2020. Can I access my superannuation?

Typically, superannuation can’t be accessed until over 60 years of age. You could apply to your super fund for access on the grounds of financial hardship if this is applicable.

You will need to show that you are unable to meet reasonable and immediate living expenses. The maximum you can access under this provision is $10,000 in a year.

Paul Benson is a Certified Financial Planner at Guidance Financial Services. He hosts the Financial Autonomy podcast. Questions to: [e-mail]

• Advice given in this article is general in nature and 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.

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