sistent performance of property values. I’ve
since spent a fair bit of time studying shares
versus property. Did you know the Australian
Securities Exchange (ASX) index at the time
of writing A Surfer’s Guide to Property Invest-
ing (December 2018) was still 13% below its
peak in 2007? This looks very disappointing
when you compare it with a carefully selected
property, which would have doubled in value
over the same period. With the right strategy
in place, real estate doesn’t have to be a burden
on your cash flow either.
If your risk profile is on the low side, riding
the waves of share price peaks and troughs
is more a horror than a thrill. For long-game
investors, property has shown a steady and
consistent value growth cycle that’s hard
to beat.Leverage
One of the secrets to building long-term wealth
in any investment type is compounding inter-
est. Combine that with the ability to leverage
(borrow against) your holding, and you can
watch your personal balance sheet skyrocket.
When I first considered the value gain on
my mum’s house, I was too young to under-
stand leveraging and compounding growth,
so I decided to learn more about it.
It didn’t take long to grasp that if you’ve
got equity in a property, it can be leveraged- and, if you can afford the repayments, why
not recycle that money?
For me, that was a “light-bulb moment”.
While my career as an investor and adviser
had not yet begun – in fact, it was still some
years away – the seed had been sown. I had
realised there was a way to own property
and build a portfolio without having to put
down a hell of a lot of cash up front. You could
extract equity from an asset and then recycle
that equity into other holdings that could
grow in parallel and thus create a diverse,
successful investment portfolio.
Control
The final attraction of property, for an investor
like me, is control. Mum’s home was our solid
foundation. As long as she could manage the
repayments on the home loan and the costs
of necessary maintenance, she would not
only provide a roof over our family’s head,
she’d also have a secure asset for her future.
You can invest in property, you can invest
in shares and you can invest in businesses.
There are upsides to each of these choices,
but in the end with your properties you’re the
one in charge. You have a tangible asset that
is always going be a saleable asset.
Compare that with a business investment,
where bad decisions – irrespective of whether
made by a CEO or non-CEO – could cause
that business to sink rather than surf. They
could potentially affect your stake in the
business and you would have limited to no
control over that.Investing fundamentals
One of the great things about the real estate
investing community is it’s a broad church.
The investor enclave comprises a diverse
cross-section of people – from first-time
millennial purchasers, to middle-aged mums
and dads, to those contemplating their immi-
nent retirement and everyone else along
this spectrum.
Investors have a variety of risk tolerances
too. While some may be happy to snap up
whatever is on offer, paddling fast and hop-
ing they’re perfectly positioned, others will
be more clinical in their research and deci-
sion-making, allowing waves of opportunity
to pass them by while they keep a keen eye
on the conditions with a plan to jump on the
ride of their lives.
Whether you’re an early or late investor, have
a high or low risk tolerance or are looking for
blue-chip or more affordable locations, there
are four fundamental philosophies that I thinkof wealth