Why property investment is the best vehicle to build wealth

The best way to build wealth, of course, is to have wealth in the first place – not a particularly useful piece of advice for those of us who arrive in the world sans silver spoon. Property investment is the next best choice.

With low interest rates and booming demand, the time is certainly right. Property investment is a vehicle that is widely available to investors starting out, and it provides a reliable way to build equity. Property investment is a strategy that can work for many, but it requires some careful planning and good advice.

Strike while the iron is hot

House prices rose by more than 16 per cent in Sydney over 2014 and by almost 11 per cent across all the capital cities combined. In 2015, many analysts expect the Sydney market to moderate, with some of the most exciting growth moving to other areas, including Melbourne, where the median house price is now $532,000 and Brisbane, where it sits at $469,000. At the same time investors anticipate rate cuts in the spring and summer. Australian commercial investors are known as some of the most optimistic in the world.

Widespread opportunity

Property investment may be an opportunity to build wealth for average Australians who have accumulated some equity in the family home. But the two most important rules for building equity are to buy with an eye on a desirable location and pay off the mortgage as fast as possible.

For example, a $300,000, 30-year mortgage at 6 per cent will cost $647,500 at term. An extra $250 paid per month could cut eight years off the term and save $100,000. That is a spectacular investment return. It produces equity that can be reinvested repeatedly, using the same basic principles.

Think with your head and delegate the details

Don’t buy investment property with your heart. If your goal is to build wealth with a rental investment, know the metrics. These include historical growth, local employment drivers, unemployment rates, vacancy rates, yields and projected population growth.

And don’t try to do it all yourself. Professional advice about your investment strategy, risk tolerance and timeline go a long way toward producing success. It is important to keep your eye on the big picture and delegate the daily details of property management.

Many Australians are already on the way to building wealth through property investment. They know that the key is not just to build, but to hold onto their hard won progress.