This week, the Property Trio unpack the concept of reverse mortgages. This is one of those strategies that sounds almost too good to be true… and that’s exactly why Simon’s question struck a chord with The Property Trio.

After years of disciplined investing, Simon and his family have built a solid portfolio and are now asking a sophisticated question: how do we actually live off this wealth in retirement?

It’s a crucial pivot point. Many investors spend decades focused on accumulation, only to realise, (far too late), that transitioning into retirement income requires just as much strategy.

At face value, the idea is compelling. Rather than selling down properties, triggering capital gains tax and reinvesting the proceeds, why not simply access equity via a reverse mortgage and hold onto the assets?

Understanding the detail behind a reverse mortgage is critical though, and Dave and Mike unpack this exciting episode as Cate hosts.

A reverse mortgage allows retirees to unlock equity in their home without making repayments, but that convenience comes at a cost. Interest compounds over time, steadily increasing the loan balance and gradually eroding equity. Unless property values significantly outperform the interest rate, (which is unlikely over the long term), the strategy typically reduces wealth rather than grows it.

There are also structural limitations. Reverse mortgages are generally designed for owner-occupied homes, not investment properties, and borrowing capacity (in the form of LVR) is tightly linked to age. Someone in their 60s may only access 15–20% of a property’s value, increasing incrementally over time.

Importantly, accessing equity via a reverse mortgage does not change the capital gains tax position. CGT is only triggered upon sale, meaning there’s no ability to “spread” the tax across multiple years by drawing down equity.

So where does that leave investors like Simon?

Reverse mortgages can play a role, but typically much later in life. Often such a product acts as as a last-stage solution for those who are asset rich but cash flow poor.

For most investors, the optimal strategy lies in forward planning: structuring assets, debt, and income streams well before retirement. Because when it comes to living off your portfolio, the smartest outcomes are rarely reactive….. they’re designed decades in advance.

Related episodes:

Ep. 13 – How age and stage of life can impact your property plan and selection
Ep. 18 – When to hold and when to fold!
Ep. 22 – Why the family home is often the biggest piece of the investment puzzle
Ep. 24 – How mortgage strategy shapes your ability to hold property and how it can pay off for decades to come
Ep. 27 – How many properties do you need to retire wealthy?
Ep. 270 – How to Build a Diversified Investment Portfolio – Aligning Personal Goals with Timing, Age & Inheritance

Upcoming episode: 356 – Listener question – unpacking whether you’re better off selling a property tenanted or vacant, and when a simple cosmetic refresh can actually add value. We’ll also explore the subtle factors that can impact price, like orientation, zoning, busy roads and even the neighbours.