Why Invest in Residential Property?

To build a property portfolio you need to formulate and stick with a consistent investment strategy. Yet many people do not embrace this strategy because they can not believe that something so simple can be so effective.

The formula is simply to buy income-producing residential property that is appropriately financed to achieve maximum tax benefits while you are working. As both cash flows and property values rise, you refinance so that your liabilities (your borrowings) increase with your assets, enabling you to build wealth by increasing your net worth. This will give you the opportunity to retire much earlier, and with more wealth, than you could otherwise. Then, if you wish, you can reduce your liabilities by selling a property or two.

Ultimately you will have a retirement package of residential investment properties that will continue to grow in value and produce a regular indexed income in the form of rent. In effect, you will be creating your very own pension and superannuation fund, but with returns that, in my experience and that of many others, will outperform all other investments over the long term.

Long-term investment in residential property is relatively unaffected by downturns in the economy, high interest rates, fuel crises, and high unemployment. This is demonstrated by the fact that in Australia for the past 100 years, the combined returns from capital growth and rental yields have averaged more than 15% per year compound. With gearing, in fact, those returns increase dramatically.

This means that the best time to invest in income-producing residential property is today. Time is always on your side.