It's the investment class that can build and build and build
The phrase ‘build your wealth’ has a very appealing ring to it. The words themselves conjure images of large houses and larger returns on investment properties.
Empires can be built around the creation of wealth, or so the internet would have you believe.
Watch enough videos on the subject and the phrase can begin to lose all meaning. If you can sit through enough you can begin to understand the buzzword nature that wealth building now carries.
While having a property portfolio can potentially help a person build wealth, it is not a simple process. Those that can sit back and watch the money roll in are in the minority.
What ‘builds’ property wealth
One of the first things to note that can build over time with your property portfolio is its value. With a rise in market prices generally comes a rise in the value of your asset.
This value is inherently tied to the market though, so if the market trends downward the price of your property can too.
Regarding your property portfolio, the capital gain or loss you achieve is the difference between the cost of acquiring the asset and what you receive when it is sold. In the case of wealth building, while the aim is to aspire to net a capital gain, any gains achieved will be taxed as a part of your income.
Rental returns are the mainstay of wealth building when you have an investment property. With the right rental return, an investor can have an asset that will provide a secondary source of income (though this will also be taxed).
This extra income can be used to save for a holiday, pay off your mortgage or be reinvested into your property to improve it and potentially gain a higher return.
One of the best ways to ensure that this is being achieved is the employment of a property manager. With knowledge of the market, they are best positioned to get you the best possible rental returns.
You can also use any equity that you have built up to borrow the funds needed to buy your next property. By using this you can build your property portfolio and your potential wealth too.
Equity is the difference between the current value of your home and how much you owe on its mortgage.
Maintaining property wealth
A hands-on, proactive approach to your investment property is a way that can ensure that its value is not only maintained but continues to increase.
Some ways that this can be achieved are:
Preventative maintenance – Upkeep on the water or heating systems in your property can be cheaper then the cost of having to replace an entire system.
Small kitchen or bathroom renovation – By replacing the handles on the cupboards in your kitchen or bathroom, you can add a modern aesthetic
Repainting – Whether interior or exterior, a fresh coat of paint is a chance to give your property a refreshed look.
These are just some of the approaches to property that can help you build the value of your investment and therefore your wealth.
By doing these you can also potentially attract a better quality of tenant thanks to the improved quality of your investment property.
Does more investing mean more wealth?
Putting it simply, investing in property costs a lot despite the steady returns it can provide. It can also seem like an ‘all-your-eggs-in-one-basket’ type of deal.
As with any large-scale investment, it is important to thoroughly research your prospective investing opportunity to make sure it is right for you. It is also important to find out whether you can handle the level of debt that comes with property investment.
With further investment though, comes the potential to leverage your investment to purchase more. By doing this you can increase your portfolio size and potentially your investment returns too.
If having a level of liquidity for your wealth is what you desire, property may not be the right investment for you. Each property that is invested in ties up large sums of money.
If you wish to sell your asset to create liquidity, it can take weeks or months to sell and it can be a costly process with the need for professionals and the fees that come with it.
Whether more investing means more wealth relies purely on each individual circumstance. While you will take on more debt, you will also be able to potentially grow the size of your portfolio and increase your returns.
At Little Real Estate, we’re determined to help all our investors build their wealth; whether they have one or 100 properties.
Contact us today to see how we can help you manage your property portfolio.
Disclaimer: The information in this publication and the links to further information within it are provided for general information only and should not be taken as constituting professional advice from Little Real Estate. You should not rely on the accuracy of this information and should seek independent legal, financial, taxation or other advice to check how any of this information relates to your unique circumstances. Little Real Estate is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, or from our website.