Sow the seeds of wealth

There are a myriad investment vehicles out there hoping to attract your hard-earned dollars with the promise of future wealth, so why should property be top of your list? In my experience, real estate is streets ahead (excuse the pun) in three key areas: predictable performance, leverage and control.

Predictable performance

In my mid-teens, I distinctly remember one outcome of my parents’ divorce was that mum paid out dad, as part of the settlement, so she could keep the family home.

My folks bought that house in Sydney’s western suburbs in the early 1980s for $35,000. The market hadn’t seemed to show a hell of a lot of growth, even after my mum became the sole owner. We even went through the staggeringly high interest rates of up to 17.5% in 1987 and 1988, which caused many property owners no end of heartache and some even to lose their homes.

Then, as if all of a sudden, it was 1993 and a revaluation of the home revealed its worth was $200,000. Nowadays that home would be worth closer to $850,000.

It struck me, even back then, that it took little effort to achieve that big result in capital growth. I thought, “Geez, that’s a lot of money – that’s crazy how much that property has gone up. You bought it for that and it’s now worth this!”

This was the first time I (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.