I think it’s important that anyone who is interested in financial independence explore property as vehicle for building wealth.
Property isn’t the only way in which you can build wealth. There are two other ways in which you can build wealth:
- Stock market:
- Investing in a business
- Starting a business
- Licensing a business
- Franchising your business
So why choose property?
Now, there are many reasons why you should choose one investment vehicle over another, but it ultimately I think it’s important that we review this from a practical perspective.
I also think that wealth creation using the other vehicles is great and they have their place as well, so this isn’t a contest of which one is better, but rather my point of view on why I focus on property.
Here are the top 3 reasons from my point of view of why I recommend you invest in property:
1. Property is stable
Property prices go up over time at a steady pace, so if property values drops, they generally bounce back in time.
It is less volatile than other forms of investment and this gives it a greater sense of stability.
It also means that it is easier to predict and forecast what is going to be happening, although making decisions on predictions alone is never a good idea!
On the flip side, a property transaction does have a longer cycle compared to shares and business, and so you can’t cash out as quickly if you want to sell. That also means that you’re less likely to make investment decisions on impulse!
2. Property is relatively simple to understand.
Property is a pretty simple concept to understand, and the language around property is used in everyday life.
There is not much in the way of jargon, and the process of making a decision in whether to buy or sell is relatively easy.
Technically speaking, there are limited products available to buy and sell: a House; an apartment; a townhouse; land – that’s pretty much about it!
This simple to understand terminology and easy to recognize “product range”, means that even the average person can understand what is involved in property investing in a relatively quick period of time, without having to get an MBA or constantly refer to a dictionary.
Why is that important?
From my point of view, this simplicity makes it easier to select, assess and decide on whether you will buy or sell a property.
3. It is easy to Leverage
The beauty of property is that everybody needs it: people need to buy it and sell it and people need to rent it.
After all, everybody needs a roof over their heads, right?
As long as you follow the processes and do your research, you will be able to make money from either selling the property at a substantial profit, or by having it pay you profits on a regular basis.
When your property is tenanted, the rent that is paid actually goes towards helping you pay off your mortgage against that property!
Also, at the end of the financial year, you can claim any expenses incurred against your investment property as a tax deduction.
Finally, once you have built enough equity in your property, you can borrow against that equity to purchase your next property, and then your next one after that as well.
All of these financial benefits are multiplied with every property you add to your portfolio.
This is what we call leverage: the ability to use something to its maximum advantage.
You can see that property is pretty easy to leverage!
Make a list of your top reasons why property investment is appealing to you, and what its advantages are.
Aim for a list of 10 points – feel free to use my top 3 to get you started!
Complete this activity and feel free to share it with your partner or someone else who is supportive, and take their feedback and thoughts as well.
Give it a go, and I’ll have some more information for you shortly.
P.S In my next e-mail, I’ll share the greatest investment you will make as a property investor.