Why Create A Property Portfolio?
Why do people invest in property and is it too early or late for you to be thinking about it?
Ask any property investor and the vast majority will throw around terms such as “financial freedom” or “financial independence” but what does this actually mean? To be financially independent means to not rely on superannuation or government assistance upon retirement. To be financially free is something entirely different.
Financial freedom gives you the luxury of choice, allowing you to choose what you do with your time.
- Retire young and not have to work beyond a certain age
- Travel the world
- Take up charitable causes close to you
- Living in a dream location
- Paying for top quality health care
- Build intergenerational wealth, create a long-lasting family legacy
Do any of these motives listed above resonate with you?
So, how can you achieve this?
History shows the most tried and tested method is to build your own property portfolio. By no means is this a ""get rich quick"" scheme, in fact it’s quite the opposite. Acquiring a safe and successful property portfolio often takes decades with the heavy lifting supported by compounding growth.
Leveraging and time contribute to this compounding growth which can be most simply explained by the example of doubling $0.01 every day for 30 days leaves you with $5,000,000 on day 30.*
Leverage must be treated with respect but when used right has the capacity to transform lives. Putting down as little as a 10% deposit on a property and leveraging the balance enables to you control a $500,000 asset with just $50,000. Given the record low interest rate environment, we see ourselves in, there has never been a better time to borrow cash from the bank - or in other words; leverage. To help make the repayments back to the bank we have tenants paying a weekly rent which can go a long way to covering the mortgage repayments and in some cases cover more.
Over the life of the loan, we have the tenant to pay the lion-share of the mortgage bringing the debt down, while capital growth works to increase the value of the asset. So a well located quality asset may well be worth in excess of $3,000,000 from your initial investment of $50,000 at the end of the loan period, truly highlighting the power of leverage and compound growth.
WARNING! Don’t be fooled by the numerous sharks and spruikers out there disguising themselves as trusted advisors when many are in fact working for developers and receive a hefty commission to lure you into buying a shiny new off the plan apartment - generally in an overbuilt and oversupplied concrete jungle.
Rather educate yourself as much as possible and if you’re after greater guidance, seek assistance from a trusted property investment advisor or an investment savvy buyers agent who have skin in the game. Ones that don’t just talk the talk, active investors themselves.
Many investors journey began through reading one book in particular, Robert Kiyosaki’s “Rich Dad, Poor Dad” and for me, this too was the catalyst. Although Kiyosaki is a Hawaiian born American, the key principles for creating financial freedom ring true for Australian investors also. There are a plethora of publications, outlining the countless strategies you can adopt as a property investor. I personally love to listen to podcasts of which there are dozens of Australian property examples run by some great hosts who are generally successful property investors themselves. Go and check them all out and see which ones reverberate with you. Convert the boring commute to and from work into a dedicated, routined property education session by simply popping in the earphones and letting the information sink in.
Personally, I understand and follow the mantra of ‘delayed gratification’ whereby I make smaller sacrifices today to better place myself financially tomorrow. As a Gen Y’er, I know all too well how easy it is to overspend in our busy social lives … but it’s not about giving up going out for brunch (and dare I say it - avocado on toast), rather it’s about making informed choices with your money. It’s not an infinite resource so allocate it wisely, spending on necessities first and then the things that bring you the most joy and fulfilment.
Ask questions of people who have succeeded in this space, they’re often happy to share their story in the hope that it may inspire you!
Do not procrastinate.
The ones sitting on the sideline are the ones who will forgo creating lifelong wealth. A recent AMP report quoted a speaker from Association of Superannuation Fund of Australia (ASFA), the guys that represent our little retirement nest egg that is superannuation, “many people will still retire with inadequate superannuation savings to fund the lifestyle they want in retirement”. If this doesn’t inspire you to take action then nothing will!
Take action, reach out to somebody, simply make an enquiry. As the old saying in property goes “no one said they wished that they had have started 20 years later”.