Exiting the property market: Is it time to invest in another asset class?
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Exiting the property market: Is it time to invest in another asset class?

By Bianca Dabu
property market, property market in sydney, property asset management

The debate about which asset class is the best avenue for wealth creation continues to this day, and while many people would argue for real estate, accountant Munzurul Khan believes that there will always be logical reasons to leave the property market.

A lot of investors prefer property for being tangible—a physical representation of their money—as well as the belief that it is harder to lose everything as the physical asset remains on land. Moreover, property investment carries more appeal in terms of long-term returns based on initial investment amounts.

However, there are still those who consider getting out of the market for a variety of reasons. According to Munzurul, the most important factor to consider when making the decision to exit the property market is one’s personal financial goal.

He explained: “What is the passive source of income that you are after in terms of your retirement? That could be any dollar value [and you should] come up with that dollar value.”

“[You can say], I need $100,000 dollar for us to retire … So as long as your portfolio is providing $100,000, you have reached into your retirement goal [and] reaching into the retirement goal also doesn't mean that we exit from it, but at least you've got a choice.”

Essentially, the passive income that you want to achieve in retirement can determine the asset that will work best for you.

Asset classes

Choosing the asset class to invest in depends on the investor’s risk portfolio and his goals and objectives, according to Munzurul. In fact, some investors often choose to invest in multiple asset classes in order to diversify their portfolio and get more opportunities to create wealth.

Munzurul shared: “You've got some properties, you've got some shares, you've got some Managed Funds … I've got a whole bunch of clients [who will] never use this Super Fund as a Self-Managed Super Fund because they want to leave that into the invested fund, have a little bit of Managed Funds, have a little bit of shares.”

“That's their safety, that's their security, that's their liquid level of asset, and that's fine. I've got a whole bunch of investors who … says ... ‘I want to set up my Self-Managed Superannuation Fund and I want to buy investment property,’ [and] maybe that's okay as well,” he added.

At the end of the day, it comes down to the Golden Rule: Stick to what you understand, what you’re comfortable with, and what will lead you to achieve your goals.

Munzurul said: “Diversification is great but diversification has to have a logic as well. The logic is, yes, as long as I understand those asset class, as long as the other asset class falls into my wider goals [or] my own personal objective, then [we could invest there anytime].”

Smart Property Investment’s Phil Tarrant concluded: “I'm happy [investing in] property because I understand it probably as good as most do and it gives me [the] confidence to take control—that's why I do it—but diversification is important, so speak to your accountant.”

Tune in to Munzurul Khan’s new episode on The Smart Property Investment Show to know which structure is best to buy in, how the ownership of a property works when referring to names, as well as the risks associated with having two names on a mortgage and title and which one is preferable to new home buyers.

 

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Exiting the property market: Is it time to invest in another asset class?
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