How to build wealth through property

Property is an attractive prospect to many investors to build wealth and equity. Informed, educated decisions help to reduce risk and make property a wise and safe way to invest. Let’s take a closer look at how and why you should build wealth through property.

Property versus other investments

There are three key ways to build wealth in today’s society: property, business and shares. Building wealth through business is similar to property wealth in that both options rarely earn value quickly. Both strategies are usually long-term solutions to building assets over time. For example, a business generally only pays off once it is sold.

The difference between these two strategies is the level of involvement they require for success. Building a business from scratch is a highly involved and intensive process. Property on the other hand, requires a fairly low level of involvement aside from renovating and maintaining. Furthermore a business is far more sensitive to external economic pressures, where as a property has the ability to be sustained through tough economic times.

Building wealth through shares is a highly volatile exercise, and therefore far more risky. Share prices can dramatically fall within moments, and if an organisation becomes bankrupt you’ll likely not receive back your invested money. The problem with shares is the highly uncontrollable nature of the environment. Property on the other hand, rarely sees that level of turbulent change.

Property is a highly important tax revenue stream for our government which means there are many laws and clauses that are in favour of investors. In addition to this, a property’s success can be largely influenced through physical and aesthetic improvements and good property management, essentially giving you far more control than you would have over a business or share portfolio.

How do I make my property self-funding?

The challenge faced by most investors is managing the difference between incoming rental payments and mortgage repayments. The key is to draw on the capital gain of your current properties by refinancing, rather than selling. This means you avoid expensive fees and capital gains tax, while keeping your appreciating asset.

It’s important to purchase a property that won’t place added pressure on you to keep dipping into your wages to ‘top up’ the mortgage. Rather, you should invest in a property at a price point that means you can remain neutral and the property pays itself off over time.

Our top tips for purchasing property for investing purposes

1) Research

The devil is in the detail when purchasing property. It’s important to understand exactly what you’re buying into by analysing the location’s current infrastructure and leisure amenities. Transport, hospitals and university access are all important features to look out for when searching for an investment as they are attractive to tenants. Thinking like a tenant will help you identify what to look for in your property, and help remove emotion from the purchasing process.

2) Strategy

Building your investment portfolio is a long-term financial solution to achieving wealth, and it’s important you have a strategy in place to reflect this. Engaging with key professionals including a financial planner and an experienced property professional will help guide you in the right direction to stay on track.

3) Add value

Purchasing a property that has the potential to be renovated will help increase your equity and property portfolio value. It is important not to over capitalise during this process, but rather sit at the higher end of the property market value.

To discuss your property investment options, contact CPS Property today.