Investing is definitely not an exact science but there are a few fundamentals that you need to do when you start thinking about investing in property. Here are my 3 top tips to get you started:
Top tip # 1: Make sure you start to invest as soon as you possibly can.
The people who make the best gains in property are those who hold their assets for at least 10 and preferably 20+ years. This means that the properties have seen several cycles of growth and are well and truly cash flow positive. This puts you in a strong position to keep on investing using the equity in the properties and to build a well performing portfolio.
Most people don’t realize how many properties they can actually purchase using their income and equity from property and so tend to put off starting to invest. This decision could means the difference of hundreds of thousands of dollars lost in opportunity cost over the course of a 5 – 10 year period.
Top tip # 2: Hold onto your best performing assets.
It’s really tempting to sell an asset that has outperformed in the market and provides you with a large chunk of cash. Make sure that you have a reason which forms part of your overall investment Strategy before selling off your equity. You read that correctly! While the money sits in your asset (investment property) it enhances your equity position and will allow you to buy more properties. If the property is sold, the equity is relinquished and you will most likely pay capital gains tax on the gain depending on the structure in which the property is held.
True wealth building works on the Strategy of continuing to acquire investment properties in growth areas and using the equity to build a portfolio. Few people achieve this goal of building wealth with great success because many become disillusioned with the underperformance of their properties and sell them before they start to perform.
Top tip # 3: Teach the next generation how to build wealth.
I meet a lot of people who are investors and often they express dismay at the increasing issue of unaffordability in the property market. They are really concerned that their kids will not be able to afford to buy property. I can understand why parents would want to buy a property for their kids but essentially they are not teaching their kids how to create their own wealth. They are merely giving them the gift of a property. Now, there’s nothing wrong with that idea – I’m sure the kids will love it.
A much better way of demonstrating how to build generational wealth is to build a strong investment portfolio and show the kids how it’s done. A little help along the way is probably mandatory but the ‘learning’ is definitely in the ‘doing’. Teach them how to build their own property portfolio and watch that generational wealth grow. I call it ‘financially future proofing your kids!