Imagine suddenly inheriting a substantial sum of money—an exciting windfall that could change your living situation forever. But before you start dreaming of that luxury home or profitable investment, are you sure you’re making the smartest decision for your future?
It is apparent that inheritances are shaking up the Australian property market, changing the way people purchase, invest in, or improve their homes.
Three key groups have emerged from this trend: The Immediate Upgraders, the Savvy Investors, and the Renovators.
These groups each spend their inheritance differently, but they all contend with the same question:
Do their choices match up with their long-term money and lifestyle plans?
Keep reading to see which group you fit into—and what you should ask yourself before making any big moves with your inheritance.
The Immediate Upgraders: Living Large
One of the most common ways people spend their inheritance is by upgrading to a larger or more luxurious home.
These Immediate Upgraders often seek to improve their living standards, looking for homes with better amenities, more space, or more desirable locations. While an inheritance may seem like the perfect chance to upgrade to your dream home, jumping in too fast can lead to trouble.
Before taking this direction, there are important considerations:
- Can I comfortably maintain the ongoing costs of a larger or more expensive home, including taxes, utilities, and maintenance?
- Larger homes mean higher expenses. Make sure you can afford the long-term costs beyond the initial purchase.
- Is upgrading my home the best financial decision for my long-term goals, or should I consider other investment options?
- Upgrading is appealing, but it’s worth evaluating if investing the money elsewhere might benefit you more.
- Am I factoring in potential changes in my lifestyle (such as retirement or a shift in income) that could impact my ability to sustain a more costly property?
- Think about how changes in your financial situation might affect your ability to maintain a more expensive home.
The Savvy Investors: Strategising for Long-Term Gains
While some see inheritance as a chance to upgrade their home, others want to build wealth through property investments.
These Savvy Investors aren’t necessarily interested in living in the properties they buy. Instead, they’re focused on generating rental income or flipping homes for profit. For them, the goal is long-term financial growth rather than immediate lifestyle improvements.
For those considering this route, key questions include:
- Have I thoroughly researched the local rental and housing markets to ensure my property investment yields strong returns?
- If you don’t know your market inside and out, you might as well be gambling. Do your homework to make sure your investment actually pays off.
- Am I prepared for the risks and challenges of managing an investment property, such as potential vacancies or market fluctuations?
- Owning investment properties isn’t all passive income and property appreciation. Be prepared for those nerve-wracking months when your property sits empty, or the market takes a nosedive.
- Should I diversify my investments beyond real estate to reduce financial risk rather than putting all my inherited funds into property?
- Consider spreading your investments to avoid putting all your eggs in the one basket.
The Renovators: Enhancing Existing Assets
Not everyone wants to move or invest in new property. Some people use their inheritance to improve their current homes instead.
These Renovators are keen on upgrading their living conditions or increasing the value of their property without the hassle of buying a new home. Renovating the kitchen, adding a bedroom, or boosting energy efficiency can be great ways to use your inheritance.
Before commencing renovations, take into account:
- Will the renovations I’m planning add significant value to my home, and are they worth the investment?
- Before knocking down walls, ask yourself: Will this reno boost your home’s value or make your life better? Either way, make sure it’s worth the dust and disruption.
- Am I prepared for the potential disruptions, delays, and unexpected costs of major renovations?
- Be ready for challenges like delays and cost overruns, common in renovation projects.
- Should I consider future-proofing my home by making improvements that will support ageing in place or increase energy efficiency?
- Future-proof your home. Think walk-in showers for when those stairs become a challenge or solar panels to keep your energy bills in check as you age.
Maximising the Potential of Your Inheritance
Want to make the most of your windfall?
A game plan is essential if you’re eyeing a new place, exploring the real estate market, or giving your current place a facelift. While property can be an excellent vehicle for wealth creation, it’s important to tailor your approach to your circumstances.
Plan for your long-term objectives, be realistic about ongoing financial commitments, and don’t hesitate to seek professional advice. An experienced buyer’s agent can provide valuable insights to help you understand the market and make educated choices aligned with your unique situation.
An inheritance is a big financial opportunity. You can honour your loved ones’ legacy with the right approach while securing your financial future.
If you’re a smart investor, a dedicated renovator, or an immediate upgrader, the property market has something for you. However, it’s a complex and dynamic landscape.
Consult a professional to learn how to make the most of your inheritance in real estate. As a buyer’s agent, I’m here to assist you in navigating this exciting yet challenging experience. Let’s collaborate to transform your inheritance into a strategic investment in your future.
