November 1, 2021


Accrue Real Estate


Michelle Viney

Generational Investing

Property investment is a lifelong pursuit which allows Aussies from all walks of life to establish a secure financial future. But while the benefits from real estate ownership are universal, the types of assets you should consider buying will depend on your age and stage in the property investor lifecycle.

Analysis from the previous census revealed that of the 2.2 million property investors in Australia, only 71 per cent held one dwelling in their portfolio. This means 1.5 million Australians started a journey toward financial freedom but are struggling to progress beyond that first asset.

A huge part of the reason for this stoppage is the lack of long-term strategic planning. By understanding the generational stages we pass through on our investment journey, we can map a path for the decades, and realise our vision of financial independence.

Here are the four broad generational phases we see in the investor lifecycle, and the types of resources and investments that help build towards their goals.


First time investors

Profile: Sub 30-years of age, mostly single and on the ground floor of their careers.

Not too long ago the first-time landlord bought their initial home in an affordable part of town. Then, when it came time to move, they held onto the property (if they could afford to) as an investment asset.

There was no premeditated plan – it just happened that way.

Nowadays, young investors are becoming more strategic. They realise that by purchasing the right type of asset and building a portfolio, they can achieve their goals faster and with more certainty.

They are also applying new approaches to purchasing, such as co-buying with friends and family, or Rentvesting – i.e., buying an investment property in a growth location while choosing to rent and live in another suburb.


Resources: Limited in terms of finance. They’ll be on starting wages and still like having a reasonable amount of disposable income to enjoy. While they won’t have dependants and will often have a lower cost of living (e.g., share housing or living at home), many want to travel and enjoy life.

In that sense, the past two years have been accidentally kind to youngsters, with enforced savings a by-product of the pandemic. Also, various grants and incentives have allowed them to get into a first home sooner.


Investment Advantages: The number one upside of being young is time.

For young investors this means plenty of years ahead to enjoy not only long-term capital gains, but also make mistakes. It’s a recoverable age so you can take on slightly more risk and know you have plenty of runaway to recoup and flourish.

Also, wage increases are in their future. Those who can be disciplined now and secure an asset, will find it progressively easier to get finance and make repayments.

Then there’s flexibility. As a young investor you’re not yet fully tethered to a location by the needs of your family. Also, you aren’t covering the costs of kids, so you can alter your own personal budget and address your needs as they arise without impacting others.


Investment style: Young investors find both real estate affordability and securing a loan, challenging.

For this reason, most should be seeking a low-cost asset with strong yield. While capital growth is always essential, they can afford to sit and wait for several price cycles – particularly if the asset’s high yield is helping cover borrowing and running costs.

Young investors won’t have loads of extra cash on hand to cover unexpected outgoings like emergency repairs and maintenance. For this reason, new properties will be most suitable.

Attached housing in new developments should be a priority. It’s high yield, has good capital growth potential (if in the right location) and onsite management will take care of the tenant’s needs for you.


Young families

Profile: The 30-to-40-year age bracket comprising couples who are planning, or in the first stages of, building a family. Most have completed their studies and internships, and have their eyes on reaching business ownership, partnership or management within the next decade.

Young families are beginning to think about their goals and motivations. Their time is precious. They’re wanting to supplement their incomes and will probably not want to spend weekends maintaining and repairing their investment property.

They’re also naturally thinking about the financial legacy they’ll leave their children.


Resources: In a nutshell, reasonably strong. They’re earning a decent wage and there’s still plenty of income upside on the horizon. Most are double-income-no-kids or just one child. This united front helps immensely in strengthening the household budget.

That said, there may also be lean years where parents take time away from work to help raise the youngsters. The cost of childcare is tough, but you are not yet dealing with the bulk of private school fees and other kid costs just yet.

The borrowing capacity of young families can be impressive – especially with a double income. They’ve also had enough years to establish a decent saving pattern. With the right approach to their financial affairs, they can be seen as a good risk by lenders.


Advantages: Time is, once more, the bastion of the under 40s. Like young investors, young families still have plenty of markets cycles ahead of them.

The time challenge they do face is in finding enough minutes in the day to deal with life more generally. This is typically a period when you are running at 100 miles an hour with your hair on fire trying to manage home life, professional life and personal time, so relying on the assistance of qualified specialists when making decisions is crucial.


Investment style: The investment style of young families is not hugely dissimilar to young first-time buyers in that they need to find the correct balance between cash flow and capital gains.

Young family investors are often in the accumulation phase of building a portfolio. They probably have their own home paid down a little and can draw on some equity for a deposit.

That said, they aren’t usually buying high-priced blue-chip stock. Cashflow is key so a strong rental yield will be essential.

New property remains a good option. This requires less ongoing maintenance, but there’s another advantage starting to creep in – tax deductions. Young families are on the cusp of ramping up their incomes, and tax deductions through interest, maintenance and depreciation will assist big time come end of financial year.


Mature families/Middle age

Profile: Families where the kids are progressing from teenager to young adult status, and you’re hitting peak earning potential. You have your career in hand and have established yourself in terms of routine, community and finances.

But time is a challenge. With so many personalities under the one roof all with their own agendas of activity, mature families must be adaptable to each other’s needs.

There are plenty of trials at this stage of life that can make investing feel like a chore. Your time is limited, and your attention is strained. It’s hard to focus on financial planning and action.

But focus you must. This is also a period where you are best positioned to solidify a portfolio of assets that can take you to retirement. Of course, this must also be balanced with an appetite for risk. A lot of important events occur during this period, so putting yourself under financial stress isn’t something you should invite.


Resources: Investment resources during this phase are mixed because your personal incomes are peaking, but your living costs are on the rise too.

These are the years where you and your partner will be making decent incomes. In addition, if you’ve invested previously and enjoyed the price growth cycle, your properties should be boosting your net cashflow.

The resources downside is costs. If you’ve got a couple of kids at school, then the outgoings will be mounting up – particularly if you’ve chosen private education for them. But even outside school fees there’s excursions, sporting pursuits, music lessons, vacation costs… the list goes on.

It’s all to say that were dealing with a high income/high outgoing environment which requires careful management and advice.


Advantages: This generation of investing can have distinct investment advantages.

For one, your strong incomes look good on the loan application.You’ll also likely to have a few dollars already invested which helps shore up your balance sheet.

Most people have bought their home and done a few improvements by now. Combine this with paying down the loan and rising market values, and there’s probably a decent chunk of equity on hand to help finance you into an investment.

The other advantage is that there’s still time between now and retirement to see at least a property price cycle or two – provided you choose wisely when building your portfolio.

In short, these investors are well positioned to ramp up their asset accumulation so long as they carefully analyse their position and manage the home finances.


Investment style: The type of property you buy will be dependent on your personal financial circumstances, so investors in this generational category must be certain of their needs.

If you’re a high-income, high-net-wealth household, now is the time to accumulate multiple high-growth assets. These are the years that will pay handsome dividends in the future. Yield remains an important consideration, but you should weigh as much as possible toward growth.

These investors should be shooting for newer homes in high growth locations dominated by owner-occupiers. New homes also deliver much needed tax breaks to this generation.

For those will less risk appetite, and a tighter financial position, consider buying between one and three low-priced assets in decent growth zones. This delivers flexibility and diversification.


Empty nesters/Retirees

Profile: This 55+ years category has seen their mature-age kids fly the coop.

They are concentrating of what life will look like post-employment. Plans for travel and pursing individual interests will be top of mind, while relationships beyond the family unit will gain importance.

While many at this stage of the cycle are beginning to enjoy the fruits of their labours and investing, there’s still value in acquiring the right assets.

Our key takeaway is… don’t worry! There is always time to benefit from investment, even late in your work life. You just need to rely more heavily on guidance and advice.


Resources: Your asset base is strong, and this pool can be drawn upon as part of your investment process.

That said, there are challenges on the finance front for some mature-age investors. Banks will be looking at your longevity and income before granting lending approval.


Advantages: Flexibility can be a great advantage at this age and stage. Firstly, moves to downsize and release equity form the family home can provide a stock of funds for further investing.

You can also be a more transient in choosing where to live, retiring to locations for lifestyle, rather than professional, reasons.

In addition, as empty nesters you could find more money in your account each week. No more supporting your adult offspring (hopefully!). Of course, once you choose retirement, the loss of wages is a challenge that must be managed.


Investment style: As a first-time investor, you were weighting asset choices toward strong yields – the sort that could help you secure a loan and service the repayments. Interestingly in the pre-retirement and retirement years, you will once again look to the strength of yield.

The income you generate from your property will help sustain your lifestyle. That said, you don’t want to give up on capital gains altogether – there’s still plenty of years left to enjoy a price growth cycle or two – and capital gains give you excellent options for selling down.

Most of those at or near retirement also want something low maintenance. Well-managed assets in excellent condition will be a priority. New townhouses or apartments are well worth considering, so long as the location has been fully vetted by a professional.


Generalise, then personalise

The one major takeaway from this information should be to start with these broad observations but personalise the journey. There are, of course, sub-categories of people who will also enjoy the benefits of investing such as divorcees, forever singles, mixed families etc.

Finally, there’s no denying that perhaps the most valuable asset of all is ‘time’. A common theme we strike with many of the investors we deal with – from young to mature – is that they wish they’d started investing earlier. The best outcomes are delivered by time in the market. So, while the advice here is useful, the next step really relies on devising a bespoke approach to your investment plans, and acting ASAP.


Disclaimer: This is general advice and has been prepared without taking into account your particular situation or needs. You should consider whether it is appropriate for you before acting on it.