How should FIFO workers invest in property?

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February 25 2020
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As Australia continues its mini mining boom, mining towns are having strong recovery housing-wise, leaving FIFO workers being targeted by property spruikers, industry experts have said.

How should FIFO workers invest in property

According to Investwise managing director Daniel McQuillan, investors looking to enter the property market should exercise caution despite areas such as Karratha, which enjoyed Australia’s highest growth.

“These towns can quickly deliver high rates of capital growth and rent returns when mining is booming, but this high-risk housing market can easily collapse very quickly.”

“Karratha is a good example. During the mining and construction industry peak in 2014, Karratha boasted median house prices of $820,000 – overtaking that of even Sydney at the time.”

“Just three years later, house prices had plummeted to just over $300,000. Those FIFO workers who purchased property in Karratha near or at the peak of the property market would have lost over $400,000, even taking into account the current recovery in Karratha’s house prices,” Mr McQuillan said.

Instead, investors can reduce the risk of this boom bust cycle by purchasing real estate in larger capital cities with a more diverse economy, the investor suggested.

Another key issue FIFO workers need to consider is putting in place a financial plan so that when they buy an investment property, they can hold onto it after they leave their high-paying FIFO job or if they expectantly lose their job.

“That financial plan should have a stress test to ensure that FIFO workers are not wasting their high incomes on unnecessary discretionary expenditures such as online movie streaming subscriptions but using their high incomes to build future wealth.”

“Too many FIFO workers are forced to sell their investment properties due to poor personal financial management, meaning that they miss out on the long-term capital and rental growth that well located property can deliver,” Mr McQuillan concluded.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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