Got Property but Still Not Wealthy? How To Generate Riches From Real Estate
The primary reason to invest in property is to become wealthy enough to live the life you want, right?
Many property investors want to know how they can generate a level of riches from real estate and live their dream life.
The good news is that it is possible to get rich, live your dream life, and accumulate great wealth from property investment.
But – and this is a big but! – property investment is not a get-rich-quick scheme. Anyone expecting to make a billion dollars overnight is going to fall flat on their face.
Smart property investors allow their properties to grow in value for decades and don’t expect overnight success. This isn’t the lottery people.
However, if you are successful in building a portfolio there is going to come a time when you want to start reaping the rewards of your efforts, and when you want to start seeing more liquid cash coming into your pockets so you can live your dream life. This is when we move from the holding phase of real estate investment to the lifestyle phase.
But how do you know the right time to do this and the right way to enjoy your riches without dwindling them too quickly?
WHY DON’T I FEEL RICH YET?
Investors who have a number of properties are likely to be the happy owners of potentially millions of dollars of real estate. That’s great, but if you’re still working five days a week and shopping in the sales section, you might not be feeling much like Midas.
There is going to be a difference between the value of what you own on paper and the amount of cash you have easy access to, i.e., what’s liquid. That’s the nature of property investment and something you need to get your head around in order to stay in the game long enough to make the maximum amount of wealth.
VALUE vs RENTS
Historically in real estate, a property will double in value between 12-15 years. So, if you bought a property for $600,000, fast forward 15 years and it could be worth as much as $1.2 million.
However, the rents will not double in that time and you need to be prepared for that.
Rent rates increase in regular and conservative increments over time and are a regular source of income. It’s going to take more time to allow them to increase to the point they make up a big chunk of passive income, so it’s better to look at how to leverage capital growth through equity.
As the value of our properties increase there is an ability to refinance and take out that additional equity. While it might be tempting to go on a shopping spree, it’s important to understand where the that cash is going. You need to ensure you can still service any loans you have and keep a buffer in place. Putting any additional equity in an off-set account allows you to redraw if you want to, but also keeps the loan structure in place should you need it. Remember also that equity is tax-free, which is another cash boom.
SELLING A PROPERTY
If you really want to access a big chunk of cash you could sell a property. But, while you get a large cash hit, there are some downsides. Your portfolio value drops and you lose the rental income. The cash you get is not a renewable asset, so it won’t accumulate the way a property will. You’ll feel the sting of sales costs through taxes and agent fees, and if you decide to buy back into the market you’re faced with taxes and fees again.
WHY NOT SET A GOAL?
If you want to know when you can start “living the dream” why not set some goals? Take enough out of your equity to be able to reduce your working week to three or four days? Allow yourself one per cent of equity growth a year to spend on what you want.
Having realistic, rewarding goals, will enable you to continue growing your wealth, while enjoying some little luxuries.
START LIVING YOUR DREAM LIFE
There are endless ways you can work towards living your dream life. Don’t get stuck in the 9 to 5 mindset. Learn how you can achieve long-term and sustainable wealth through property like the thousands of other investors we have helped.
Sign up for one of our information and education events, where you’ll be equipped with the tools, resources and support to thrive, and not fall behind on your path to financial freedom – whatever that may look like for you.
Book your spot now and find out what you need to know about the current market landscape and how you can make it work for the ultimate wealth creation opportunities.
By Jason Whitton
Group CEO Positive Real Estate