If you’re thinking of buying investment property, have you considered why? There are many personal, sentimental, and cultural reasons that Australians like to buy investment property: we can see it, touch it, furnish it, our parents owned one…
But to truly prepare for property investment, it’s key to understand the underpinning financial benefit: many of us have dreams and aspirations to do things we cannot currently afford. Some of us simply want to continue to pay for the things we do today and maintain our lifestyle.
Your magic number
We have found that the magic number for our clients is around $80,000. If you could achieve $80,000 income from your investments (i.e. without having to do anything) would you be closer to affording the things you want to do in life?
This would require an investment portfolio worth around $2,000,000. How are you going to get there? Investing in property is an effective way to accelerate your wealth and achieve your aspirations.
The property difference
Imagine Samantha, Gemma, and Lyndall all have $50,000 saved and want to invest it. They all want to earn a passive income of $50,000 as soon as possible, but at least in 20 years. This would require about $1 million in assets.
- Samantha invests her $50,000 in cash and she earns 3.5% per annum on her money for the next 20 years.
- Gemma decides to take a little bit more of a risk and she invests it in blue chip shares on the stock market and earns an average of 8% over the next 20 years.
- Lyndall uses her $50,000 as a deposit on a home and purchases a $500,000 residential property. The property increases by an average of 4% per annum over 20 years and yields 3% as rental income.
Fast forward to 2036:
- Samantha (Blue) now has $90,000 cash in the bank.
- Gemma (Red) has investments worth $233,000.
- Lyndall (Green), minus the money she owes the bank and all the interest paid back on the loan over 20 years, has an investment worth more than $550,000.
Questions? Feel free to contact a member of our specialist property advisory team at EDA Property. Our property investment specialists have had many years’ combined experience in advising everyday Australian on choosing the best investment property to suit their individual circumstances.