When it comes to real estate investment, there's one sure way to land a winner
When it comes to long-term returns on property investments, ownership of land has continually delivered growth as strong as any other investment vehicle.
Buy an asset that will grow and don’t delay, I was once told. Make your money work for you. Work smarter, not harder.
It was this advice that put me on the path from debt-ridden student to financial independence.
Sounds easy enough, but for those who heed this advice, it’s important to acknowledge that gaining financial control in these uncertain times must be viewed as a long game.
If you work smart and buy the right asset, it should double in value every decade.
So, what sort of asset is best for a first-time investor?
The most important factor to consider when dipping your toe into the investment market is what type of asset is going to provide you with the best capital growth - the one asset that will do that is land near an Australian capital city.
Granted, it’s a bonus to derive a good rental income and tax deductions along the way, but the way you can build wealth successfully through property is for it to grow in value - land does that best.
Land appreciates, buildings depreciate
It’s also worth remembering that no matter how incredible a house may look or how much you love it, the value of the actual building is guaranteed to decrease as it ages, while maintenance costs go north.
The median house price in Sydney has increased from $175,000 to $1.24 million since 1990, an increase of seven times.
As the population grows – Sydney has 20 per cent more people today than in 1990 – the blocks of land get smaller and further out from the city centre.
Land prices have increased from $100 per square metre to $2,750 per square metre in those areas where the median house price was $175,000 in 1990 – an increase of 26 times!
Most people know that the value is in the land, and yet nearly half of all property investors don’t buy land.
Where to invest in real estate
You need to do your homework and make sure you buy in the right area, otherwise you won’t enjoy as much capital growth.
Look at land in areas with good population growth, employment opportunities, and infrastructure like schools, public transport and supermarkets etc.
Capital cities provide the best opportunities, as 90 per cent of Australia’s population growth occurs in our five main capital cities.
Essentially the best capital growth is gained from areas where people want to live, and get a job, and is supported by infrastructure investment as the population grows.
The best performing asset in the past 30 years
I’d be amazed if there was a better asset you could invest in over the last 30 years than land near Australian capital cities.
Now, most of us don’t have the money to simply buy a block of land and sit on it. So, to cover the costs of borrowing, build the bare minimum house that will give you enough rent and tax deductions to cover the holding costs.
There is only truth in numbers and if we follow the numbers, we arrive at land being the safest and best investment you can make.
