It is easy to believe that the rich play to a different set of rules when investing; rules to which we are not privy.
Well, that’s not the case. Wealthy investors use the same basic property investment strategies that are available to everyone. The only difference is that they‘re diligent.
Theirs is a game of preserving wealth. The wealthiest spend their time and resources building income generating assets so that they don’t have to work anymore than they should.
A lot of us don’t appreciate how long it takes. We get overwhelmed with the mechanics of property investing. And quit before we even start.
The rich get richer because they play the game longer.
If you’re looking to build wealth through real estate, you have to learn to play with the sharks. You have to develop a similar mentality to the rich and master some of the strategies that they use.
To get you started on this journey, I’ve prepared 5 property investment strategies that the rich generally follow to grow their portfolios.
Set Goals in Advance
What do want to achieve? What does success look like to you?
The rich generally invest in property to secure their financial future or to open up more time to do what they want to do when they want to.
In order for you to get anywhere, you have to know where that is. You must have your goals at hand before you can achieve them.
More importantly, you need a deadline for when you should achieve them.
Say you’re looking for a retirement cushion to happen in the next 10 years. You can create a plan. Break it down into 5-year, year, and bi-annual plans right up to your weekly goals. This will help you to determine the steps you have to take today to get started.
A Purchase Plan
What does a workable purchase plan of a rich person look like?
There’re a few things they take into account:
- Even before they start planning how they’re going to buy, they try to know where how they are you standing financially.
- Their goals determine the type of property that they buy.
- Attitude to risk.
They assess how much risk they can stomach. How much time they have before the deadline of their goals. How much property knowledge and experience they have.
The purchase plan serves as a structure to stay on top of the game.
Here’re a few things that they include:
- Define a strategy.
- Set up the criteria.
- Start doing your research
- Create a list of the properties you fancy. Cull your list.
- Get appraisals on different properties.
- Do your due diligence.
- Make an offer.
Use of Leverage and Discounts
The savviest of property investors use two tools adroitly. They use leverage optimally and buy property at discounted prices.
Leverage is a simple tool. If you put down 20% on a $1,000,000 property, you are fronting only $200,000. The rest of the funds are provided by the bank. Supposing the property has a rental yield of 3%, the rate of return on your investment will be a whopping 15%.
In essence, you are profiting with borrowed funds or other people’s money. The rich know this very well and use it in almost all investment ventures. It allows them to build more wealth with less money.
They also buy property at huge discounts. If you can buy a property at a much cheaper price than your neighbours and rent it out at the prevailing market rate, your rental yield will be higher.
This is all so simple and yet ignored by the rest of us. It is probably the only way you can build wealth generating property.
Budgeting and Risk Management
Risk management holds a high place on the agenda of most high net worth individuals. New investors often take excessive risks to generate huge returns. The wealthy focus on the downside of risk. Preservation of capital is more important.
It’s not interesting. Not even remotely. But budgeting is the only way to ensure that you don’t lose your head. It allows you to balance your incomes and expenses.
Tenacity is Crucial
A lot of things can go wrong in property investing, as with any other income generating venture. The people who succeed are the ones who push through the hard times and keep going.
Tenants lie. Some default. Contractors cheat. And your family will most likely think you are crazy. The rich have gone through all of it. They have developed the guts to push through.
To them, every huddle is an opportunity to learn. This is the attitude that anyone looking to make a fortune in the real estate market needs to adopt.
If you are interested in taking this route to build wealth, understand the tenacity; the dogged discipline it takes. You can do it but it takes time. It’s hard work. Just look 10 years into the future, if you buy right today along with the right strategy, you can be sitting on the wealth cushion that you’ve always dreamed of.
We’re here to help you develop the right property investment strategy. For an obligation-free chat to understand how we can help you, reach out to us today.
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