PROPERTY OR POVERTY - WHICH WILL IT BE?

REAL ESTATE, IS IT BETTER TO BUY MY OWN HOME OR RENT ?

- Firstly I will give you a theoretical answer to this question. If you put aside the equivalent amount that you would otherwise make in home repayments, and invested that in quality shares that consistently paid a reasonable dividend of about 5% fully franked, and those shares consistently increased in value in line with the market average, then shares would probably give you a better return over a 20 to 30 year period of time. If you look at the question over a short period of time such as 5 years, then the question is much harder to answer as both the share market and the property market have cycles that don't always coincide. What I mean by that is, it is often the case that the property market is booming and the share market is not, and vice versa. It is then a case of "timing" the market rather than "time in" the market.

However for most people the ability to sell their shares and buy consumer goods such as a home entertainment centre etc. etc. etc. is just too tempting to resist. For the average person who wants to get ahead in life and can and will make their home loan payments, then the purchase of their own home will be the most important investment decision of their life.

So yes in my opinion property is generally a better investment simply because it is a form of forced savings that will in turn lead to financial options that most people without property will only dream of, even if that process takes many years. Almost all wealth for individuals has been built on property investments. Without property I'm afraid you will suffer financially in the long run.

THE BASIC RULES OF BUYING & OWNING PROPERTY:

1. You must buy at the right price. Buy with your head and not your heart, if the deal is not going according to plan, walk away.
2. Never, never, never let greed or desperation creep into your negotiations. Keep a level head at all times.
3. You must maintain your property, and always keep it in a saleable condition. You never know what life has in store for you. Run down property will always sell below true value.
4. Don't be afraid to trade up during the course of your life, as long as each step increases your wealth. As your families needs and wants change, perhaps your house should change with it.
5. When the kids have left home, don't be afraid to downsize, but don't downsize your expectations in lifestyle quality. Smaller should mean less housework, but not less enjoyment in home living.

YOUR FUTURE

- In these days of compulsory superannuation, if you purchase a house at a early age around 25, you should have it paid off just after your children leave the family home while you are still in your fifties. Once the children are no longer a financial burden, and the family home has been paid off, your whole world will change. That's when overseas trips, better quality cars, furniture, and money in the pocket days will start. And why not, you will have worked hard for it.

OTHER INVESTMENTS

- lf you have been careful with your money over a period of time, then you should have started to either accumulate funds, or equity in your home. Either way it is now a good time to look at other investments. Look for either a second property, or build a share portfolio of quality shares. We won't give you advice on what shares to buy, contact a stock broker for that, but if you don't use a stock broker then as a rule of thumb stick to blue chip proven performers.

WANT TO HAVE BOTH?

- Yes why not invest in both. Build your wealth at a speed that suits your age and financial position. Basically if your young and adverturous, then go for it. If you are are approaching the end of your working life, this is not the time to risk everything. Make your investments cruise. They should build gradually to decrease risk, and to decrease the impact it may have on your lifestyle

FREE LOAN REPAYMENT CALCULATOR - Download our calculator to help you make your decisions. You need to know what repayments on each loan will cost you before you proceed.

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