Property investing while market is soft could be a way to make millions

It’s easy to think that getting rich from property is something other people do, but a simple table shows how it’s possible for anyone.

Aussies love property. We love buying it. We love owning it. And we love talking about it.

With the property market softening around the country off the back of interest rate rises, many would-be property buyers are wondering if now is the time to pick up a bargain.

There’s a lot of fear in the property market today, and with good reason. The recent record number of interest rate rises caught many people by surprise, and some are now realising they’re overextended.

But at the same time, history tells us investing through property is the most effective way to build your assets and wealth. And with prices falling up to 10 per cent around the country, with a soft property market forecast through the end of 2022 and into the new year, the market is stacked in the favour of smart property buyers.

You don’t need 10 properties

But you don’t need a heap of properties to get ahead. I’ve included a table below showing how property would grow over time using the 150-year property growth rate of 6.3 per cent.

You can see from this that starting with $1 million of investment property value, over 10 years you could make a total of $842,182 after taking away your starting property value.

Over 20, 30, and 40 years, you’d be looking at growth of $2,393,636, $5,251,697, or $10,516,767.

If you have more property, the numbers get even bigger – and quickly.

While the numbers look good, this also tells me you don’t need 10 properties. You don’t even need five. But the more you have, the faster your wealth will grow.

On paper, the strategy that can get you from where you are today to building the most wealth will be to borrow as much money as the banks will lend and buy as much property as possible, all as quickly as possible. But this is often not the best strategy, because you need to manage your risk (and you need to be able to sleep at night).

How to get the best results when you buy property

You can see from the figures above that investing through property is powerful – but not everyone achieves this sort of success when they invest through property. If you want to give yourself the best chance of getting the results you want, you have to be smart about how you tackle your property investing.

Property investing is a great way to get ahead – when done right. Picture: NCA NewsWire/Gaye Gerard

There are a lot of different opinions on this, but my take is that there are just two things you need to get right to achieve success investing in property.

First, you have to choose a good property.

And second, you have to make sure you’re never forced to sell your property at the wrong time.

Choosing a good property

There are a heap of different ideas and approaches, and the volume of content you can find online is staggering. Most property gurus are adamant around why their way is ‘the only way’ and why everyone else is wrong in their approach.

But the thing is, there are a lot of different ways to be right when it comes to property.

You can chase the property hotspots, you could buy-renovate-flip, buy off-the-plan and sell before completion for a profit, build a positively geared property portfolio, target distressed properties, or just follow a simple buy and hold strategy.

All these strategies can work, and they all have worked in the past.

The approach I take personally, and the approach we follow when helping clients invest in property, is a simple one – buy quality properties in premium suburbs.

One method to investing is to buy a quality property in a premium suburb. Picture: iStock

Every city is different, but if you look at the fundamentals you’ll find the areas where supply and demand best support property growth are up and down the east coast of Australia within 10km of the Sydney, Melbourne and Brisbane CBDs.

These are the areas where supply is most limited and demand is forecast to be strongest through population growth. These areas aren’t going to be the cheapest, but they’re premium for a reason.

Never be forced to sell

Particularly with what’s going on with interest rates today, property affordability is a challenge. If you’re going to buy property, you should see it as a long-term strategy and a long-term commitment, so you need to be able to comfortably fund your property investment over the long term.

Comfortable means that you can afford the ongoing property payments and ongoing property costs like rates and maintenance, and fund the lifestyle you want, and still have enough money left to get ahead with your money.

The key here is clarity on what things will look like after your purchase. You need to map out your money to see how the numbers stack up today and into the future.

A rise in interest rates has shaken up the property market. Picture: Gaye Gerard

When looking ahead, it’s important you consider any major changes to your income or expenses, things like time out of the workforce for family, childcare and schooling costs, or other major expenses that are important to you.

When you get this right, you’ll build the confidence to buy your property, knowing it will actually work for you.

The wrap

Property is a powerful way to grow your wealth. But property investing is a serious commitment, so you need to plan well to get the results you’re looking for.

There are a lot of opinions out there about property that can mean things get pretty complicated pretty quickly, but it doesn’t need to be. Like with many things, simple is effective.

Understand the power of property investing and how it can help you build your assets, but know you don’t need a heap of properties to create serious wealth. Then choose a good property and make sure you’re not forced to sell it, and you’ll be well on the way to the results you want.

Ben Nash is a finance expert commentator, podcaster, financial adviser and founder of Pivot Wealth, the host of the How to be Successful with Money podcast, and author of the Amazon best-selling book ‘Get Unstuck’

Ben runs regular free online money education events to help you make better money choices and get ahead faster. You can check out all the details and book your place here

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.