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When you hear the word “addiction”, what images flood your mind? You’re probably imagining a person with an irresistible, and dangerous, attraction to a substance. Drugs, alcohol… chocolate?
Fortunately, this is not one of those kinds of addictions… although once you’re hooked on property investing it will overwhelm your every waking thought. Unlike the other kind of addiction, you will be better off for your newfound habit!
Here are the 6 Fantastic Reasons You Should Fuel Your Property Investment Addiction!
1. You’ll have more time to enjoy what you LOVE to do, rather than spend all of your spare time doing what you HAVE to do.
The freedom that comes from having a portfolio that delivers a good passive income cannot be described. What would you do if you woke up one morning and didn’t have to sit in bumper to bumper traffic on your way to a job with no real prospects for advancement?
Would you love getting up – whenever you wanted to (think brunch every single day) – or would you miss your old job? The great thing about property investing is that if you really want to stay at your current job you can certainly do just that. In essence, you have FREEDOM OF CHOICE…and who wouldn’t love that?
2. Enjoy the ability to choose when and how you’ll retire.
Want to spend your retirement travelling the world? Maybe you’d like to spend your days building schools in a third world country, or even staying at home spoiling your grandchildren while your sons and daughters chase the career of their dreams. Whatever you want to do when you’ve retired (or even if you never want to retire) property investing gives you the option to choose how you’ll spend your retirement.
3. Have an opportunity to leave a legacy
While it may not often be talked about, you’re not getting out of this alive (and by ‘this’, I mean life). If you’re like many people I’ve met, you want to leave a little something behind. Whatever shape that “something” takes – endowment for a large charity, collectibles to a museum, or a home for your children – property investing can make it possible.
4. Have a safe investment with much less risk than shares
Over time, Australian property has shown itself to be a steady, reliable investment. In spite of recessions and environmental crises, property has kept pace with shares – on average at 11.5% per year since 1926.
While the data also makes a case for share investing, University lecturer, investor and author Peter Koulizos said, “When you factor in the return and risk associated with buying property and shares, property wins hands down.”
“Shares have [marginally] higher capital growth, but the difference in risk is huge. The risk is measured in variation in returns and capital growth (or loss) on shares can range from +40% in a year to -40% in a week! You don’t get that sort of variation in property, hence it is considered a safer investment.”
5. Have the option to use leverage
Leverage is one of the most powerful tools any property investor has in their arsenal.
Yes, you can borrow when buying shares, however, according to Mr. Koulizos, “You can borrow more [emphasis added] when using property as security as compared to using a share portfolio.”
You can borrow up to 95% of a property’s value but you may only get 50 to 60% towards a share portfolio’s value. This means using leverage to buy real property gives you the ability to access the capital growth of a larger asset.
Mr. Koulizos describes the concept very succinctly. “Imagine two people in the same job, on the same income, same assets and considered to be a similar risk by the bank. The person wishing to buy a house may be able to borrow $450,000 based on their financial position whereas their workmate may only be able to borrow $300,000 to buy a portfolio of shares.”
Assigning a growth of 10% to each asset, at year’s end the real property will have net $45,000 in capital growth whereas the shares would have gained only $30,000 during the same time.
6. Have control, unlike the share market
When shares fall, they fall – you’re at the mercy of the market. Now to be fair, real estate does fall but the decline in values takes place a much slower rate. In other words, you can generally see it coming and you can also do something to mitigate your losses.
For example, if you own an investment property in an area that is in a trough and you plan to hang onto the property until it’s at peak again – which is obviously the best time to realise your capital growth – you have more options than someone sitting at their computer, watching their shares literally drop right before their eyes.
You can change your financing, (e.g. new mortgage with better terms or pay down existing mortgage to add equity), force value through renovations or subdivision or simply sit where you are and wait for the cycle to come around again.
To learn how to make property investment your new addiction, come along to one of our Property Investor Nights. By attending one of our events, you’ll learn how to use real estate as a wealth creation vehicle as well as the best places to invest to maximum growth.