Are You Set On Becoming A Property Tycoon? Here’s How to Get Started

August 26th, 2010

Young investors should build steadily growing property portfolios
Despite the relaxed lifestyle in the Western World, financial and personal finance media have in recent months been hammering home the message that a vast majority of middle class people still come to retirement age with insufficient resources. Many consequently have to continue to work well into their late sixties and seventies, some until they die.

Start early
A spokesman for a major insurance company says, “The time to start thinking of your retirement funding is when you are still in your twenties or thirties, and in my view, you cannot do better at that stage than start buying into property. “Jack Smith, one of those who bought his first property while still in his twenties, has gone so far as to say that you should aim to buy one property per annum.”

Jack Smith’s story
A young agent, Jack Smith who works for a real estate company, has just bought his first rental property for a knockdown price of $35,000. Here is a young man who has set himself a goal of owning a significant property portfolio, big enough to retire on by the time he is 50, and he is prepared to make big sacrifices in comfort and luxuries to achieve that goal. If only others would do the same rather than frittering money away on holidays, entertainment and other transitory pleasures.

Rental
On this sort of inexpensive but good area properties Smith will be able to achieve a rent of $450 per month within the first two years and this will escalate annually by 8 to 12%. His monthly mortgage payments will, however, be under $375, enabling him to invest in another property within a few years. Thereafter he will be able to up the acquisition process. The big advantages of this type of investment are that the income stream keeps pace with inflation; it can be placed in your spouse’s name, thereby reducing your income tax payments and it can be passed on intact to your heirs who, if you so wish, can be prevented from selling it.

The stock exchange
Asked if the stock exchange might not give a better return to the dedicated young investor, it is usually not possible to borrow money to invest in shares, as you can on a mortgage bond and there is always an unknown factor to be contended with; even the biggest and best companies can find themselves on a downward path. Shares are ideal for those in the know. Unfortunately, very few of us are in a position really to know what a company will do.

Stay with property
On the other hand, property is straightforward. By and large, what you see is what you get and you can gather information on the market conditions by talking to agents and reading the advertisements. Recent figures have shown that residential property has fared far better than other categories in the recession.

This entry was posted on Thursday, August 26th, 2010 at 4:41 am and is filed under Finance, Personal / Internet. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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