For over 10 years my husband and I have worked to build a property portfolio, and whenever I tell people what I do I’m often asked if property is still a good way to build wealth.
Property is an excellent way to build wealth over time. It is a stable investment that appreciates over time, and it provides a tangible asset that you can sell or borrow against if needed.
There are many ways to invest in property, from buying a home to flipping houses to investing in commercial real estate. While there are risks associated with any type of investment, carefully choosing your properties and working with experienced professionals can help you minimise those risks and maximise your chances for success.
Owning property is a great investment because it provides passive income, which doesn’t mean there is no work to be done, but does mean you’ll receive a rental income even during times you do nothing.
However, owning property comes with risks. The value of your property could decrease over time, and you could lose money if you fail to keep a rental property filled with paying tenants.
Property as an investment
When it comes to investing, there are many strategies that people can choose from. Some people invest in the stock market, others in mutual funds, and still others in real estate. Each of these has its own set of pros and cons, but I believe that property is one of the best ways to build long-term wealth.
How can property be used to build wealth? I went down the buy-to-let route, but others fix and flip, where you purchase a home that needs some repairs, make the necessary changes, and then sell it for a higher price.
When you invest in property, you are buying an asset that will typically appreciate over time. This means that your investment will be worth more down the road than it is today, which isn’t something you can always say about other types of investments like stocks or bonds.
The reason I took the plunge into property as a long-term investment and see it as such a good way to build wealth is because it provides passive income. This means that once you have purchased a rental property and found tenants to live there, you will receive ongoing payments each month without having to do lots of additional work. This was a great option for me as I had 2 young children, and it allowed me to work flexibly around them.
Over time, I’ve used this income to reinvest in other properties, pay off debts, and save for future goals like retirement.
Lastly, I feel like I have much more control over my investments than those who invest in stocks. For example, as a landlord I can choose what rent I want to charge, what to invest in renovation, and when to exit by selling a property.
Is property a good way to build wealth?
I can say moving into the property business was one of the best decisions I ever made, but you have to keep in mind that investment property is a long term game.
My general advice to anyone who asks if they should try to build wealth via rentals as I have is that there is no one-size-fits-all answer, the decision depends on a variety of factors, including market conditions, the investor’s goals and risk tolerance, and their overall knowledge of the real estate market.
Property ownership has several distinct advantages that make it a good way to build wealth. These include:
- Equity growth: With each mortgage payment made, the homeowner’s equity increases. This leads to an increase in net worth over time.
- Value appreciation: Property values generally go up over time (unlike some other investments), so owners can see sizable gains in their investment portfolio just by holding onto properties long-term.
- Lifestyle benefits: Owning property gives you the freedom and flexibility to do what you want with your life. You can choose to live in your investment property, rent it out to tenants, or sell it for a profit.
- Stability: Unlike stocks and other investments, real estate is a physical asset that tends to be much more stable in terms of value. This makes it less risky and therefore a more attractive option for some investors.
- Tax benefits: Property investors are able to make certain deductions from their taxable income, I would always recommend hiring an accountant to talk you through your options in this area.
Of course, there are also risks associated: buying at the wrong time can lead to losses if the market takes a downturn, properties can be hard to sell in a hurry if cash is needed elsewhere, and vacancy rates can mean that you’re not bringing in any income from your investment.
However, these risks can be mitigated by doing proper research into potential investments and using strategies like flipping or renting out.
What are the risks associated with property investment?
When it comes to property investment, there are a few key risks that you should be aware of. The first is the risk of not being able to find a tenant. This can lead to missed mortgage payments and other financial difficulties as you don’t have money coming in.
Another risk is the cost of maintaining your property. This includes everything from painting and repairs to gardening and landscaping. If you’re not prepared for these costs, they can quickly add up and eat into your profits. You always need to have a contingency pot of money put aside.
Finally, remember that changes made to a property (such as adding a new bathroom or bedroom) can impact its value. So before making any changes, make sure you understand how it will affect the overall return on your investment.
What are the most popular property investment strategies?
There are several strategies that can be used to make money. Here are five of the most popular:
- Flipping: buying, renovating, and reselling for a profit shortly afterwards
- Residential rentals: buying a home to rent out to tenants long-term
- Airbnb: Offering out a room or your entire house on Airbnb for short-term rental
- Commercial properties: investing in properties which are used for businesses, such as shops, office buildings, and factories, which are then rented out
- Property development: Building your own property to sell
Each of these requires a different approach and should be approached with caution, speaking to experts before spending a large amount of money to ensure you receive a favourable return on investment.
What are the key considerations when investing in property?
Before deciding whether to invest in property, there are a lot of things to consider, but I would always start by asking 2 key questions:
- How much capital do you have available?
- Do you know anything about property investment?
If the answer to the second question is nothing, you need to do a lot of research (so it’s a good job you found my website!) and then if still think you might be interested in investing in property but aren’t sure what steps to take next, speak to an expert who can help guide you through the process.
Not sure who to speak to? I’m happy to send you my personal recommendation.
What are the common mistakes made when investing in property?
Take it from someone who has been there, done that, there are common mistakes that everyone can make when they invest in property.
The first mistake is not doing their research. Research is absolutely vital to your long term success. It’s important to learn as much as possible about the market you’re investing in, as well as the specific property you’re interested in. I cover this further here: Property investment for beginners.
Another mistake is not understanding the financials of a property investment. You need to be familiar with things such as how much money you’ll need up front, what your monthly expenses will be, and how long it will take you to see a return on your investment.
Another common mistake is not having a solid plan for refurbishing the property. This can lead to delays or even cost overruns, which can jeopardise your entire investment.
Not hiring a professional property manager can also be a costly mistake. Property managers can help you find good tenants and keep an eye on your investments while you’re away.
Remember that building a passive income source takes time, patience and experience in order to be successful. Don’t rush into anything without doing your homework!
What are the expert opinions on property investment?
Having gained over 10 years experience of investing in, and building wealth via property then I do have a lot of knowledge about this field.
If property owners can create a business owner mindset to real estate investments then it’s very possible to build up a healthy passive income stream, one that I’ve personally seen grow as I’ve expanded the number of residential properties I own.
It’s not a get rich quick scheme, and it can take a lot of money upfront, but for those looking to create an additional income stream that can continue after you’ve given up work as additional retirement income, the property market is certainly the area I’d recommend
Other people will have different opinions based on their own personal experiences and knowledge. If you’re thinking of investing in property, it’s important to do your research and get as much information as possible before making a decision.
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