Is property really an investment?
Yes, the price has gone up.
But does that make it a good ‘investment’?
If you ask the world’s greatest investor, Warren Buffett, who’s lived in the same house since 1958, he might say:
“Buying a house is usually a lousy investment.”
Sure, Buffett’s house might be worth $1.5 million – a tidy sum indeed – but compared to his net worth of $143 billion, Buffett’s property is about 0.001% of his assets.
Now, that’s Buffett.
(And he’s probably relying on US housing data and research from the likes of Professor Robert Shiller, which shows US property has been a very lousy investment – after inflation is factored in.)
But we are not Buffett.
And we are Australian.
In my opinion, Australian property can be a wonderful vehicle for creating and storing wealth. But make no mistake – it’s not a risk-free investment.
(And it’s definitely not going to be the best-performing investment after fees and costs, in my opinion.)
But what makes property the #1 asset for most of us are these unique factors:
1. Leverage – Aussies can use a loan to carefully unlock growth in interesting ways, but home loans are particularly special.
2. Lifestyle security – rather than moving the family every few years, being a landlord and owning a home gives you security over where and how you live.
3. Financial security – while renting can sometimes make more financial sense than owning a home, just ask Ramit Sethi (another US finance person), having a mortgage is forced savings. Plus, you can choose a fixed-rate mortgage if you want smooth monthly repayments.
4. Debt recycling and equity release – the ability to ‘withdraw’ some money from your property’s value to use in other ways, like investing in shares or a business, can be really tax effective. And the rates are good when structured right.
5. Long-term supply/demand imbalance – there are fewer properties available for sale in Australia than in years gone by, yet we have many more people. And councils and corrupt trade unions are making building new houses and apartments completely unaffordable. It’s that simple. Prices are going up.
Today, at 12 noon, on YouTube, I’ll be finishing off the final instalment [episode 5/5] of our foundational Rask Invest LIVE series.
This fifth and final episode is all about property – the tricks, the traps and the trade secrets that will make you rich… or send you broke.
