As the economy moves out of the doldrums we are entering a new market cycle and we are seeing the share market purchase and some sectors of the Australian property markets literally thriving.
So the question I am posing today is: which is a more effective investment - KI Residences.
If you asked Jesse Trump he would say property is the only road to make sure you riches. On the other hand if you asked Warren Buffet he would reveal that you could become financially free by investing in the right dispenses.
Who is right, and which investment is right for you will?
It should be fairly obvious by now that I believe income making residential property is the best option for the average Australian as well as New Zealander to develop financial independence and I'd like to show you why.
In essence I said that while it's really very hard to outperform the long term averages in the share market (that's why many managed funds try just to track the particular averages), it's really very easy to outperform the averages once investing in property. You do this by buying well and purchasing the right type of property, one in a high growth place and one to which you can add value.
Let's look alot more carefully at the reasons why I like property as an investment:
one Property is an imperfect market. When I look to invest, I must invest in an imperfect market. This means that I'm more likely to get to buy an investment below its true value, or perhaps I can sell above its true value.
Let me reveal this in more detail...
The world of shares seriously isn't a completely perfect market, but it's about as great as it gets. That's because it is a liquid market whereby investors are well informed. I can buy stocks at the very same price as anybody else can. In general, the overall current market has the same information as I have, because for the most part the content is equal. This shared knowledge creates a more 'perfect' market.
On the other hand, real estate is what I would call the imperfect market. I know many people who have bought properties within 10, 15 or even 20% below real market appeal. If property was a perfect, liquid marketplace, you would not even be able to buy a property considerably below its intrinsic importance. I can do this every time, and so could you because information, friends and expertise help you get an insider's edge in an imperfect market.
2 . You can add value to your properties. By adding worth to your property, through buying well or through restorations, you can accelerate its rate of capital growth. However the fate of the value of your shares is completely out of your hands - it depends on how well the company, and the administrators who run it, perform.
3. Property is a primary human requirement, but companies (and their shares) arrive and go. Unlike a business or corporation in which you can buy shares, property is a fundamental necessity. Everyone needs a roof covering over their head, whether they rent or own the home, but let's face it - companies can be purchased and go all the time. As a basic necessity, housing will always be in demand - it will always have value because we only can't live without it, which gives property the advantage through shares with less risk and greater stability gradually - in other words, property is as "safe as houses".
contemplate. Kiwis love property and it will always remain trendy whereas the share market downturn scared many at a distance during the financial crisis. In Australia almost 70% of us personally own our own home and recent surveys show a huge number in Australian are considering purchasing an investment property over the then few years. While the home ownership rate in New Zealand is lower Kiwis seem to love property - this is partially because property, unlike shares, is a tangible commodity. You possibly can touch it, see it and yes - live in the software - and people like the security associated with property.
Additionally , all of us understands residential property - they have either owned, hired or lived in a home. It's familiar and stuffs that are familiar naturally feel safer. Shares on the other hand - well they represent unchartered waters for many. Considering the stress and panic many investors experienced with huge share market losses within recent financial crisis, more and more investors will turn to the safeness of property as we move into better times.
5. It will be easier to become an expert in property - there are less unknowns than with shares. While you might like to think that you possibly can master the world of shares, on-line trading and collaborative legalities and structures, the simple fact is that it is much easier to realize a sound comprehension of property investment than it is regarding shares. Sure it will require some learning to become an expert through property, but this is far less daunting for the beginning real estate investor than trying to comprehend how the corporate world or typically the share market works.
6. Property can be leveraged by way of a mortgage. No other investment vehicle provides you with the opportunity for you to leverage 80 of its value in order to acquire additional of it as a part of your portfolio. Not only that, if the value of this property investment falls (as may happen in the downward step of the cycle), the bank don't come knocking on your entrance asking for their money back as they do with margin enquiries on shares (unless of course you can't meet the repayments). Better still, once you own property, you can leverage off of the growing collateral you have in it to buy even more property.
7. Property possesses a proven rate of return. Property is a proven secure strong investment. When you can look back over ten, 20 or so, thirty, even fifty years, you get a picture of how strongly property has increased in value over time.
8. Property values are less volatile than shares. Take it into consideration... residential property is the only investment market not centric by investors, and this effectively gives investors a built in back-up. Even if all the investors were to leave the market at the same time, it would not totally collapse.
9. Property is further tax effective than shares for investment. When you put in place your property investment business, a raft of legal place a burden on deductions (I like calling them loopholes) open up to your account.
Still need convincing?
If you look at the results others experience achieved, you have to say that property makes pretty good investment decision sense. According to the BRW Rich 200 list, property seems to have consistently been the major source of wealth for Australia's multi-millionaires. And it's the same all over the world. Those that haven't made the money in property generally invest their surplus funds on real estate.
With a new property cycle starting, maybe now is a good time for you to get into the property game?
Early in my 30's, I already considered that becoming financially independent well before the 'normal' retirement was certainly a possibility. To me financial independence is a place when my monthly passive income covers my regular monthly expenses. I am longer dependent on a wage.
My favourite method of wealth creation and financial independence is home.
I found some interesting information about property investors... less than 1 ) 5% of investors own more than four investment components and 87% own only one investment property. I come across this interesting because when we started on our residence investing journey, we didn't start with the intention regarding owning one investment property. Our intention was to set up a property portfolio that would eventually replace the need to work. One particular investment property would not be enough.
I wondered why 87% of property investors stop at one investment property. Achieve they have similar goals to build a property portfolio? If sure, why do they stop buying at one?
When i was astounded to find that I am in the top - 5% of property investors. Astounded because I am a little regular person, on a regular income who got proficient, found a plan, took action and over time found achieving success.
The next important question is how many properties do you need to turned into financially independent? I think most property investors would think it's quite surprising that you may only need five properties. Let me look at an example.
In the area where we invest, you would really need to own five properties outright to replace an income of $62, 000 per year. This is based on a median property rate of 450, 000 and a median rent of $425 per week. You would need to own four properties outright to an income of $50, 000. These figures would depend within the price and rent of the properties you are buying.
Even, if you are holding a minimum of five good properties in your real estate portfolio, over time a wealth of capital growth will be making. If today I am holding five median priced real estate, my total portfolio would be worth $2, 250, 000
It's generally said that property purchased in a decent location, doubles in value every 7 to decades but this depends on many variables in the economy. Let's possibly be conservative and use 10 years.
My example portfolio will be worth $4, 500, 000 in 10 years time as well as $9, 000, 000 in 20 years time. If I really don't sell the properties, there will be an amazing amount of equity for sale to live a very comfortable lifestyle. This is in addition to the rental Now i'm still receiving on the properties.
I would need professional help to learn how to tap into the equity, but this is the remarkable journey property investing offers. Buy and hold building in a good location, manage your finances to ensure you can put them for the long-term and then see the equity build because property values increase.
A buy and hold place investment strategy offers long-term streams of income: nightly rental income plus tapping into the equity created by the property account capital growth.
For 10 years I have been on my own journey when it comes to financial freedom. That journey has involved time, dollars, energy and a focused belief that it is possible. I have learn lots of books, attended workshops and seminars, completed training, studied others, but most importantly jumped in and ingested action. Mistakes have been made and many lessons have been discovered but 10 years down the track, I am now loving the results.
I truly believe that anyone can achieve his or her dreams on life. To me a dream is just a not but still realised reality. If you can picture what living your vision will look like, describe it in words and burst it down into smaller goals that you can work on each month, it will be no longer a dream. It will become a reality as long as you stay in focused on your goals and take action.