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The Secrets To Wealth Through Property

I never ceased to be amused by the property magazines and the Guru newsletters all claiming some great unknown is about to be revealed. “THE FIVE KEYS TO PROPERTY SUCCESS.” “THE SEVEN STEPS TO PROPERTY WEALTH”, “EIGHT SECRETS THAT PROPERTY MILLIONAIRES DON’T WANT YOU TO KNOW.” They're always written in upper case.

In fact, there are no secrets to achieving wealth through property. As we all know, investing in property, like all other investments takes time, experience, strategic planning, courage and a little luck.

From my point of view there are three fundamentals that are important. Cash flow, property growth and initial equity.

What I mean by initial equity is buying property below market value to provide some profit that can act as a buffer should the market slow or decline in the first few years of ownership. If you have purchased below market value you have a little “wriggle room” should you need to sell in the short term. The great difficulty is finding good property below market value. Given almost all property is sold via real estate agents , who are extremely familiar with the market and motivated to ask the highest price, it is almost impossible for the average investors to find a “bargain”. I certainly never have.

Cash flow considerations are now very much in the fore front of investors’ minds. In previous years our belief in endless, predictable capital growth meant that cash flow could be forsaken as we expected capital gain to cover any cash flow shortfalls. The property went up in value quicker that we paid out money to hold it. The GFC put an end to that belief. Today’s investors analyse the ongoing holding costs to ensure they remain less exposed to slower markets. Low interest rates have helped enormously in reducing costs. One danger investors face is in becoming obsessed with positive cash flow at the expense of growth, or more dangerously, buying properties in high risk areas because they are focused entirely on cash flow.

Although capital growth has lost a little of its shine recently the big money is still to be earned in buying quality property in good areas and waiting for the magic of compounding growth to take effect. If you can buy and hold a property in a quality location, with good infrastructure, increasing population and ongoing economic growth expectations (like Perth) then chances are you will double your money in 7 to 10 years.

Now of course comes the hard part. How can you buy a property that is in a sound location, is not cash flow negative and is cheaper than market value? Good luck with that!

Occasionally these properties do come up. Developers forced to sell. Distressed sales or bankrupt builders. They are few and far between and you need to be bold, quick and lucky.

The only other alternative is to become a developer. Source the land, complete the construction and the 20% profit provides some safety between your costs and the market value. You have some “wriggle room”. Because you have paid below market value, the rent return is proportionally higher making the project cash flow neutral, if not positive. This means you can hold the property at no cost to yourself, enjoy long term capital growth and should the market remain flat you can always sell to recoup the original 20% developer’s profit. Sounds easy! Well it’s not, but we can help. Talk to us at about our Armchair Developer™ concept and we can explain the process and get you started.

There you go! You now know “THE FIVE KEYS TO PROPERTY SUCCESS.” “THE SEVEN STEPS TO PROPERTY WEALTH” and the “EIGHT SECRETS THAT PROPERTY MILLIONAIRES DON’T WANT YOU TO KNOW.” Wealth through property awaits you.