Generating Wealth In Real Estate

If you’d like to generate wealth with property investing, you are certainly in good company. Property is one of the best investment vehicles, and probably the best asset class available, for wealth building purposes. If you take a look at Australia’s ‘BRW Rich 200 List’, or the ‘Forbes 400 Richest Americans’ list, or whichever list is available in your country, and look to see where the majority of the people on the list made their fortunes, Property will likely stand side by side with Business as the vehicles with which more people created their wealth than any other. Just ask Australia’s Wealth Coach Hans Jakobi. Sure, sports people and entertainers often claim the headlines of the newspapers, but in reality they really only account for a small proportion of self-made millionaires.

So what makes real estate stand out above all the other asset classes? There are 4 primary factors to real estate that make it a unique asset class for wealth building. These are:

1. The Leverage you can achieve when purchasing investment property. This relates to the proportion of the purchase price that banks are generally prepared to lend on real estate purchases, typically 80% of the property price, but this can be higher. Leverage is the secret power booster for your investing because you can put 20% down on a property, and if it appreciates by 10% in value in the first year, you will have actually made a 50% return on your invested money.

2. The demand for property: everybody needs a roof over their head

3. The limited supply factor for property. Unlike apartments or condominiums, property with a land component has a limited supply factor. Developers can always build new high rise buildings to dilute the supply of apartments in a particular area, but they cannot dilute the supply of land available.

4. The price inflation that occurs on property. This can be due to overall inflation in the economy, growth in the economy over time, or simply demand in an area of limited supply.

We expand on all of these 4 factors in much greater detail in our article on Creating Wealth with Real Estate, and reveal in detail the 4 factors that determine the price inflation of real estate. It is this price inflation, coupled with the high degree of leverage which can be achieved when purchasing investment property, that makes it such a choice asset class for wealth building. Be sure to also check out our companion article about choosing high growth investment properties. Ensuring the application of the right selection criteria on the investments you purchase will have a huge bearing on the returns that you will attain over time.