We’ve all seen just how much property prices have grown over the past decade, let alone over the past 40 years. However, achieving wealth through property is still something that eludes many investors.
The vast majority of investors only own one property and never really get far enough ahead from that property to make any real difference to their lives. While there is undoubtedly much wealth to be made, most investors are making some simple mistakes when it comes to buying well and growing their wealth.
Finance Matters
Most investors and homebuyers are focused on the wrong thing when they are looking at property, not realising that it’s actually finance that plays a huge part in building wealth. The fact that property can be so highly leveraged is a key reason why it is so powerful as an asset class.
However, if you are not using finance effectively, it will likely slow you down. For example, two people can have the same financial situation in terms of income and debts and the same lifestyle, yet when they go to a lender, they are able to borrow very different amounts of money. The key to building wealth is to have the right people around you. Having an investment-savvy mortgage broker can mean the difference between buying one property or buying ten.
Property is a game of finance, so learn how to play the game or find the right expert to help you.
Not putting your money to work
You build wealth in property by purchasing assets that grow in value. While it might be good to pay down your debts, true wealth will come when those assets increase in value.
If your properties don’t grow in value and you’ve just paid down the debt over time, then all it’s done is cost you money in the form of interest when you could have saved the amount of money that you paid down in the debt and actually got a better outcome.
Also, by paying down debt, you’re also limiting your ability to expand your portfolio rapidly. Depending on your personal circumstances, you might be better off looking to grow your portfolio early on with smart purchases and strategies rather than paying down debt. When you’ve built up a large enough foundation, you can then look at ways to pay down the debt.
Buying Poorly
The majority of people who invest in property don’t actually do well out of their investments.
In reality, 96 per cent of investors stop at one property and more often than not, it’s because that property underperforms and ends up costing them money. Typically, people do well out of their principal place of residence, because the traits that make it a great place for them to live are typically what makes it a good investment over time. But when buying investment properties, they focus on the wrong type of assets like off-the-plan apartments.
When buying an investment property, try to factor in all the great things that a potential owner-occupier might want as well. That way, you’ll be well on your way to finding great locations and properties that will appeal to a wide range of buyers and see steady growth over the long term.
If you are interested in the above, feel free to reach out to a Henderson buyers agent today for more information.