Truth about property

Truth about property

truth about property

An amazing truth that I can share with you after having worked professionally with property investors and homeowners for almost two decades is this.

Everybody that still owns property they bought in the 1970’s has done extremely well and has great equity in their properties today!

In fact, the same can be said for anybody who still owns property bought in the 1980’s, 1990’s and the first half of the 2000’s.

I agree that properties bought around the time of (or post) GFC, in some places, are yet to deliver owners attractive gains that they can be excited about.

I think it’s fair to say that property ownership plus time equals capital growth (or wealth).

Heading off to work day in and day out gives us a living but to create lifestyle we must do more.

I was speaking with an accountant / financial planner yesterday and he said the best decision he made in his financial life was to get into debt at 19 (I’m referring to the right kind of debt).

He went on to say that he encourages young people to do the same; to go out and buy a property.

Why? Because it forces them to prioritise paying to hold onto that asset first. As such, they may not take as lavish a holiday or they may not have as much money to ‘waste’ on the weekends; but they will be taking responsibility for their financial futures from an early age and at the beginning of their working lives; also developing great habits.

Time in the market

“Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.” 
― H. Jackson Brown Jr.,

The advantage that your kids have over you when it comes to building wealth is time.

If you had the capacity to buy a handful of properties in the 1970’s and 1980’s but didn’t… how do you feel about that now?

From time to time since the GFC I have had a small number of clients ‘freak out’ because a property they bought may be worth less than what they paid for it.

The truth is that can happen but property is a medium to long term investment and ten years from now any (paper) losses will be more than compensated for.

I say paper losses because unless you sell there will be no loss.

In the late 1980’s the State of Victoria was on its knees. The Cain and Kerner Labor governments were in all sorts of trouble. The Pyramid Building society collapsed and people’s property values plummeted.

Those who sold at that time cemented their losses for all times but those who hung on to their properties and allowed the passage of time to bring about a correction.

Once Jeff Kennett came into office he went about repairing the State of Victoria and in a matter of years those that held onto their properties  were rewarded financially for their patience.

In fact, those who bought property just prior to the Victorian property market’s downward spiral and still hold that property today would not be suffering from a single negative emotion about the property’s value; they are sitting on incredible gains that they can leverage against or cash out.

Avoiding future disappointments

If you don’t buy property today, how long do you think it will be before you wish you had; five, 10, or 20 years?

I can promise you that over time any property you hold will double in value, I just cannot say how long it will take.

Historically, well located, median priced, residential real estate, close to infrastructure and services has doubled in value ON AVERAGE about every seven to 10 years.

Some doubling cycles are longer and some are quicker, but I am talking long-term averages.

Develop a strategy today to change tomorrow’s outcomes

Even if we set our expectations for a doubling cycle to take 12 years - to be really conservative; would you rather have a $400,000 real estate portfolio today that was worth $800,000 in the next 12 years or a $1.5m portfolio that grew to become $3m?

That’s a rhetorical question but my point is this:

Have you developed a strategic plan to grow your wealth over the next seven, 10 and 20 years ?

Property delivers other (often forgotten) benefits

What a lot of people forget is that even while you are waiting for your investment property to enter its next growth phase it is delivering additional financial benefits to you.

  1. Reduced taxation
  2. Fasttracking the elimination of nondeductible debt (i.e. your mortgage) - subject to you first having the right finance structures in place.

It’s worth repeating the quote by H. Jackson Brown Jr:

“Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.” 
 H. Jackson Brown Jr.,

MRD has been successfully supporting clients to build long term wealth for their family’s future since 2002; that’s 14 years.

We understand the traps and pitfalls that many people inadvertently make.

If you would like to speak with us about a plan to help you get to where you want in life, call us on 1300 883 854 or contact us online and tell us how you would like us to help you.

Partnering with you for your financial success,

Nick Lockhart