The Property Factor To Investment Success

Posted on May 6, 2008
Filed Under Real Estate |

If you’re seeking to create wealth with property investments, 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. If you 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 the majority of those 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 often claim the newspaper headlines, but they really only account for a very small percentage of self-made millionaires.

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

1. The Leverage one can obtain when purchasing investment property. Leverage relates to the percentage of the purchase price that banks are usually prepared to lend on real estate 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 20% down on a property, and if it goes up by 10% in value in the first year, you will have actually made a 50% return on your money invested.

2. The demand for property: we all need a roof over our head

3. The limited supply factor for property. Unlike condominiums or apartments, property with a land component has a limited supply factor. Developers can always create new high rise developments to dilute the supply of apartments in a particular area, but they cannot dilute the land supply available.

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

We expand on all of these four elements in detail in our article on Creating Wealth with Real Estate, and reveal in detail the four elements that play a part in the price appreciation of real estate. It is this price appreciation, together with the high degree of leverage which can be obtained when purchasing investment property, that makes it such an outstanding asset class for wealth creation. Be sure to also check out our companion article about selecting high growth investment property. Applying the right selection criteria on the investments you purchase will have an enourmous bearing on the investment returns that you will attain over time.

Tags: Real Estate

The Property Factor To Investment Success

Leave a Comment