Monday, August 15, 2022
HomeReal EstateWhy property investment is about finance, not real estate

Why property investment is about finance, not real estate


Buying a property, whether it’s your first or your fifth, is a well-established pathway to long-term prosperity.

It’s a brick-by-brick journey to building personal wealth and it requires patience and discipline to achieve your goals.

But acquiring property isn’t just about selecting an asset and sitting tight.

In fact, building a portfolio is a strategic interaction of moving parts, and one of the most substantial aspects is finance.

Accessing adequate funds when the time is right allows you to accumulate a portfolio of assets while also reducing pressure on your day-to-day household budget.

So, what are the key steps for using finance to grow your prosperity?

1. Setting goals:

Step one is asking yourself what you really want to achieve with your portfolio.

Are you looking to travel in style come retirement, or would you simply like an early exit from the workforce?

Are there major fiscal milestones you’d like to achieve along the way, like upgrading your home or putting the kids into an excellent school?

Spend some time thinking about your goals.

Think about life 10, 20, or 30 years from now.

Will you have dependents to support?

Will you be preparing to downsize? Could an interstate move be possible?

Or an overseas one?

What could a rental income from three or four homes do for your lifestyle?

For your family?

Understanding your goals – both ultimately and progressively – allows you to determine when it’s best to draw on finance, and to what degree.

And don’t be scared to dream big as one of the best quotes I’ve ever heard when it comes to goal setting is “You are better to set your goals high, and fail than set them low and achieve them!”

2. Financial clarity:

Property Price

Setting goals is the first step – sketching out bold goals unfettered by limitations must be done before looking at finances and budgets.

Dream big before you crash into the reality of the hard work that will make it all happen!

To buy a property in Australia you will need (in most cases) a minimum deposit of five per cent of the purchase price.

A deposit this small, however, will incur additional costs, such as the lender’s mortgage insurance (LMI).

But this is insurance that the lender takes out in case you default. A larger deposit will prove to the bank that you’re a safer bet and thus reduce or remove the need for LMI.

There are ways to avoid this such as using a guarantor and this is a great way to get started in either home ownership or investing for the 1st time.

The second step to a property purchase is understanding exactly what your budget is.

Have you added up the cost of all the streaming services, the meals out, and the bought lunches?

How much money do you have leftover at the end of your pay cycle?

Is it enough to save for a deposit?

Probably not.



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