Advice For Homes

If you’re seeking to build wealth with real estate, you’re in good company. Real Estate is one of the best investment vehicles, and probably the best asset class available, for wealth creation purposes. Take a look at the ‘Forbes 400 Richest Americans’, or Australia’s ‘BRW Rich 200 List’, or whichever list is available in your country, and look to see where most of the people on the list made their fortunes, Real Estate will likely stand side by side with Business as the vehicles with which more people built their wealth than any other. Just ask Hans Jakobi r.e. his Real Estate Secrets. Sure, sports people and entertainers catch the headlines of the newspapers, but in reality they really only account for a small proportion of self-made millionaires.

So what makes investment property stand out above all the other asset classes? There are four primary factors to investment property that make it a unique asset class for wealth creation. These are:

1. The Leverage you can obtain when purchasing investment property. This relates to the percentage of the purchase price that credit institutions are generally prepared to lend on investment property purchases, typically 80% loan to value ratio, but this can go higher. Leverage is the secret power booster for your investing because you can put a 20% deposit into a property, and if it increases by 10% in value in the first year, you will have actually earned a 50% return on your invested money.

2. The demand for property: everybody needs a roof over their head

3. The limited supply factor for property. Unlike apartments or condominiums, a property investment with a land component has a limited supply factor. Property developers can always create new high rise buildings to dilute the supply of apartments for a given area, but they cannot dilute the supply of land available.

4. The price inflation that occurs on property. This can be due to overall inflation in the economy, growth in the economy over time, or simply demand in an area of limited supply.

We expand on all of the above four factors in detail in our article on Creating Wealth with Real Estate, and reveal in detail the four factors that determine the price inflation of investment property. It is this price inflation, coupled with the high degree of leverage which can be achieved when purchasing investment property, that makes it such an outstanding asset class for wealth creation. Do not fail to also check out our companion article about choosing high growth investment properties. Applying the right selection criteria on the investments you purchase will have a huge bearing on the returns that you will attain over time.

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