Why Smart Buyers Keep Investing

  • Why Smart Buyers Keep Investing image

If you want to be a truly great property investor, it’s important to think like one. That means training yourself to think differently to everyone else. One of the great mental roadblocks people encounter is viewing debt the wrong way. They are scared of taking on property debt, but seem fine with accruing credit card debt, or car loans.

But debt on property is good debt. Borrowing to invest in property, if done correctly, is the gateway to huge intergenerational wealth.

Appreciating assets

Unlike cars, credit cards, holidays or big screen TVs, property is worth more the longer you hold it. Not only that, but it returns you a regular income, which increases over time and can actually pay your debt off for you. Meanwhile, the debt you owe on it reduces over time.

When B. Invested founder Nathan Birch began investing, his strategy was always to use debt to gain access to equity that would allow him to leverage into more and more assets, building an increasing amount of equity along the way. His strategy took him from a deposit on an affordable property to now having more than 220 properties and tens of millions of dollars’ worth of net wealth. His value gains have put him well in front, while his returns have increased enormously over the last couple of decades.

Thinking long term

Property is not a get-rich-quick scheme. It is a great vehicle for building long term family wealth, but you are more likely to have success if you spend time in the market. Say you have made a couple of savvy investments and have created value gain while getting enough rental income to pay down the debt. You could sit on those couple of properties and have a sweet little retirement income, plus some assets to pass onto the kids…or you could use that equity gain to repeat the process with 5, 10, 20 properties or more.

The reason smart buyers keep investing is that they want every bit of cash they earn to be put to work earning more. If they sit on the cash they earn, they immediately begin losing money. That’s because inflation means cash in the bank is worth less every day it sits there. By putting it back into property investment, it begins earning more every day once again. And one of the great things about property is you only need a relatively small deposit, to access the growth generated by the entire asset.

The power of location

A property’s value is linked to its location. If you’re planning to keep on investing, you need your assets to have an upside, so you can keep bringing in equity. Blue chip locations will hold their value, but fringe suburbs have more room to grow, because they are coming off a low base. And with housing affordability at all-time lows and people’s borrowing power evaporating, more buyers are being pushed to the fringes. This will mean more value growth as competition intensifies.

Don’t fear interest rates

A lot of people are being put off investing by the sharp rise in interest rates over the past two years. But smart investors realise that interest rates are a part of life and simply need to be dealt with wisely.

Rates have risen, but so have rents, meaning your income boost may cover most or all of any recent hikes.  And if you are paying interest only, like most investors do in the initial stages of their investment loans, you should be able to keep your portfolio positively geared. That way, you won’t be in a position to start losing money from all the extra repayments. And staying positively geared means you are still able to push forward and keep investing. If you need help figuring out what your strategy looks like or you need more information, reach out to the Investor Relations team at B.Invested.



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