Aussies love ownership. We like to buy it. We love owning it. And we love talking about it.
With the housing market across the country falling on interest rate hikes, many prospective homebuyers are wondering if now is the right time to grab a bargain.
There is a lot of fear in the real estate market today, and with good reason. The recent record number of rate hikes caught many people by surprise, and some are now realizing they have been stretched.
But at the same time, history tells us that investing in real estate is the most effective way to build your wealth and wealth. And with prices down as much as 10 percent across the country and a soft property market forecast through the end of 2022 and into the new year, the market is stacked in favor of smart property buyers.
You don’t need 10 properties
But you don’t need a bunch of real estate to get ahead. I’ve included a table below showing how real estate would grow over time, given the 150-year real estate growth rate of 6.3 percent.
From this you can see that if your investment property value is $1 million, you could earn a total of $842,182 over 10 years after taking away your initial property value.
Over 20, 30, and 40 years, you would expect growth of $2,393,636, $5,251,697, or $10,516,767.
As you own more property, the numbers get bigger – and fast.
While the numbers look good, this also tells me you don’t need 10 properties. You don’t even need five. But the more you have, the faster your wealth grows.
On paper, the strategy that can get you from where you are today to building the greatest wealth is to borrow as much money as the banks lend and buy as much property as possible, all as quickly as possible . But that’s often not the best strategy because you need to control your risk (and you need to be able to sleep at night).
This is how you achieve the best results when buying real estate
You can see from the numbers above that investing in real estate is powerful — but not everyone achieves that kind of success investing in real estate. If you want to give yourself the best chance of getting the results you want, you need to be smart about how you approach your real estate investments.
There are many different opinions on this, but I believe there are only two things you need to do right to be successful in real estate investing.
First you need to choose a good property.
And second, you need to make sure you never have to sell your property at the wrong time.
Choosing a good property
There are a ton of different ideas and approaches out there, and the amount of content you can find online is overwhelming. Most real estate gurus are adamant about why their way is “the only way” and why everyone else’s approach is wrong.
But the thing is, there are many different ways to be right when it comes to real estate.
You can chase the real estate hotspots, you can buy, renovate, flip, buy off plan and sell at a profit before completion, build a positively biased real estate portfolio, target distressed properties, or simply follow a simple buy and hold strategy follow.
All of these strategies can work, and they all have worked in the past.
The approach I personally take and the approach we take when helping clients invest in real estate is simple – buy quality real estate in prime suburbs.
Every city is different, but if you look at the basics you’ll find that the areas where supply and demand best support property growth are along the east coast of Australia within 10km of the CBDs of Sydney, Melbourne and Brisbane .
These are the areas where supply is most limited and demand is expected to be strongest due to population growth. These ranges won’t be the cheapest, but they’re premium for a reason.
Never allow yourself to be forced to sell
With what’s going on with interest rates today, real estate affordability is a challenge. If you are looking to buy a property, you should think of it as a long-term strategy and a long-term commitment, so you must be able to comfortably fund your property investment over the long term.
Convenient means you can afford the ongoing real estate payments and ongoing real estate expenses such as installments and maintenance and finance the lifestyle you want and still have enough money left over to get your money moving.
The key here is clarity about how things will look after your purchase. You need to map your money to see how the numbers are shaping up today and in the future.
As you look ahead, it’s important that you account for any major changes in your income or expenses, things like family time off, childcare and school costs, or other major expenses that are important to you.
When you get this right, you build confidence in buying your property, knowing that it will actually work for you.
Real estate is a powerful way to grow your wealth. Real estate investing is a serious commitment, however, so you need to plan well to get the results you want.
There are many opinions about real estate that can mean things get pretty complicated pretty quickly, but that doesn’t have to be the case. As with many things, simple is effective.
Understand the power of real estate investing and how it can help you build your wealth, but know that you don’t need a bunch of real estate to create serious wealth. Then choose a good property and make sure you are not forced to sell it and you are well on your way to getting the results you want.
Ben Nash is a financial expert, commentator, podcaster, financial advisor and founder of Pivot Wealth, host of the How to be Successful with Money podcast and author of the Amazon bestseller Get Unstuck.
Ben regularly hosts free online money education events to help you make better money decisions and progress faster. Here you can see all the details and book your place
Disclaimer: The information contained in this article is general in nature and does not take into account your personal goals, financial situation, or needs. You should therefore consider whether the information is appropriate to your circumstances before acting on it and, if necessary, seek professional advice from a financial professional.