Many clients come to see us with the idea that they can make money from property, but they don’t really understand how. If you know the formula, and you get it right, then it’s relatively easy to make money through property investment and often it doesn't cost very much to do so. How is that possible? How can you grow your wealth with little initial outlay?
Well the first thing you really need to know is your numbers. You need to know how much you can afford to borrow and how much it will cost you to hold on to the property. If this part isn't done properly then the capital growth of the property is irrelevant. A property could yield 15% per annum however if you can’t afford to hold the property during this time, it really doesn't matter because you’ll be forced to sell it, or other assets, compromising your overall wealth position in order to keep it.
Researching the areas that are set for good capital growth is so important because this is where strong capital growth and early wealth are created. Property, as an asset class, over a 15-20 year investment horizon can expect to enjoy a 6% capital growth. This is mapped against other kinds of asset classes, such as foreign exchange, bonds, managed funds and shares and takes into account the opportunity over risk, which is a great way to define ‘investment’. However, one third of the total investment profits in property, if well picked, will occur in the first 3-5 years of the investment. This is where it is cheap and easy to grow an impressive portfolio. And this is how.
If you purchase a property for $400K and it returns 12% capital growth, on average, over the first 4 years then in 4 years time that property would be worth $629K. That’s a yield of $229K, which means the rental returns should have grown from around $380 per week (depending on the location of the property) to $600 per week. Such an investment would signify that the investor bought the property in a cyclical upswing. After this 4 years, the investor would now have $229K more equity to use for their next investment.
Again, if the research is done correctly, this capital growth can be used to invest in your next property. So if you have $40K in savings or equity we can get you started on a low risk strategy to grow your asset position, set yourself up for retirement and give you greater freedom. Call 0482 080 189 to make an appointment.