When people look at investments, there are three main areas to choose stocks, property or money saved in interest-bearing accounts.
Why property proved to be the most effective choice?
In Australia and many other places around the world, over the ownership of the last 50 years by an average 10% pa compound growth. (Are carefully selected properties that are higher average). Not forgetting that investment properties also generate revenue from the lease.
Median house prices in Australia have averaged growing at 2 – 4% pa higher than inflation, a very sound investment.
One of the most effective way to prosperity is to build a portfolio of real estate held for investment (in the space of 7 to 10 years) to collect and then let the power of compound interest to work to your advantage.
The main reason that property can be better used than shares as an investment is, to additional benefits for highly leveraged real estate investment.
Use is where you use some of your money along with most other people’s money (bank loans) to secure the investment value is much larger than you can own only with your money.
If you invested $ 10,000 directly into shares rose by 10%, then in 7.2 years they would be worth about $ 20,000. On the other hand, if you used the $ 10,000.00 as a deposit of 5% to $ 200,000.00 property and borrowed the remaining 95% plus establishment costs. If this also by 10% then in 7.2 years your investment would be worth $ 400,000.00. This means that the use of your investment, you have won an additional $ 190,000.00.
Compounding has a greater power, the longer it is allowed to work. With the above example, if you cover the period from 21.6 years in search, the results are quite surprising.
Unleveraged shares would be worth $ 80,000 and $ 1,600,000 property, a differential $ 1,520,000.
It is possible to borrow 100% of the purchase price plus the cost of the property securing the deposit against your own four walls, so you do not have to bail.
Do not be a liability as a bad thing?
There are two types of debt. Good debt, where you borrow money to secure the asset to generate with respect, revenue. Bad Debt is where you borrow to buy with the devaluation of non-revenue producing terms such as boats, cars or holidays.
There are different strategies for property investment, different people that depends on current income or financial situation.
The combination of a good use of debt to buy property and then compounding it to do its work – seems to be the most effective way to create wealth. But this is clearly not a “get rich quick schemes”, otherwise it is “Get rich slowly” scheme which works most effectively over a period of 10 to 20 years. It takes patience and perseverance, but after talking with dozens of other real estate investors, many of whom have become multi millionaires within 10 to 15 years, I think it is valuable.