The new year is a time when most people take a bit of a breath and assess where they are at and what they want to achieve over the next 12 months.
Naturally, property is a big part of what most individuals and families are talking about over the holidays and many people set goals for themselves around what they want to eventually obtain.
The issue I see a lot of people running into is that their property goals are probably not realistic for their current financial situation. What I find happens is that people set these huge targets in their head and when they fail to make any headway quickly, they soon give up.
This is very common with property goals. Many people like to pluck an arbitrary number out of thin air and state that they want a $10 million property portfolio and $500,000 of income.
The problem is that your property investment journey is going to be heavily linked to your income when you are getting started.
For example, if you have an income of $80,000 per year, you are going to need to do something very big to build a passive income of $500,000 per year. You’re not only looking to replace your income but increase it by over six times.
If you weren’t looking to use property to achieve those goals, how realistic would it be that you could grow your current income from $80,0000 per year to $500,000? For most, that is not something that will be happening quickly.
When you set your property goals, they also need to be realistic. For someone earning an $80,000 per year income, a more realistic target might be a $2 million property portfolio over 15 years that is bringing in $100,000 in passive income.
What this is doing is replacing your income and saving you all the time that goes into earning that salary. The timeline is also a lot more realistic than those that what everything to happen in the next 12 months.
For those people out there on a higher salary, it’s OK to have those higher goals like the $500,000 per year passive income. In reality, a $100,000 passive income wouldn’t really change your life all that much so you need to be shooting for something bigger.
But that also brings us to the question of if you are on $80,000 per year, how can you move to that upper echelon?
Well again it comes back to making changes in your life. Property alone is possibly not enough. You are going to need to focus on building up your skills. Can you improve your sales skills? Are you able to go out on your own and start a business? You need to be doing things that bring in higher levels of income.
While property itself is a proven performer over the long term and has built considerable wealth for people, you also need to focus on income. Investors are typically limited by the amount of money you can borrow. When you are on a lower income, the banks will not lend as much as you might like and you will eventually run into a ceiling.
So when you’re setting goals for 2024, be sure to not just look at what you want to achieve, but also how you are going to achieve it.
To make the most of property, you want to be increasing your asset base with high-quality assets, while at the same time, finding ways to boost your income. Start with the end in mind and work backwards to make a realistic plan.
That is how you build wealth long term.
If you are interested in getting ahead in the property market, feel free to reach out to a Henderson buyer’s agent today for more information.