I spent the past week re-reading Jan Somer's book - Building Wealth Story by Story. No doubt people who have bought property over the past 20 years and have held onto it have made substantial profits. Residential property as an asset class has been a top performer over this time frame.
With some in the finance world expecting capital growth rates in residential property to diminish over the coming years, it would seem appropriate to challenge the validity of the buy and hold method as a way to building and preserving wealth. The loosening of credit in the late 90's and naughties gave rise to an unprecedented boom in residential property prices that is unlikely to be repeated in the near future.
While the investors who have been successful in Jan's book have adopted a number of strategies (developing, renovating etc) the majority of successful property investors simply bought multiple properties over time (sometimes over a period of 40 years) paid down debt and held on. They then kept buying when they could afford to. (Never overcommitting!)
There is a section in the book devoted to mistakes that investors have made. Some of them are chilling - tales of people loosing everything (substantial portfolios) due to careless mistakes. Others selling up to invest in term deposits, only to end up on the pension later in life, and still one other example of a couple who after 30 years had a portfolio with 3M in equity, only to loose it by acquiring a business or two without undertaking proper due diligence.
What are are you thoughts on:
1) Whether the buy and hold strategy is still an effective strategy for building wealth going forward? Is it still feasible to rely on being able to buy 10 properties and then balance the debt when you want to retire by selling down a few properties??
2) Is future growth sustainable considering the high price of real estate today?
3) Apart from relying on capital growth, what are you doing to speed up the process of accumulating equity in your portfolio?
4) Are you selling to balance debt as you go along, or selling to move your money into other ventures (be they property, shares, business or other?)
5) Or are you buying holding and accumulating more properties with the view to selling down to retire debt and live on rents in years to come?
* I am a buy and holder and the strategy is working well for me to date. But I am always interested to read other's views.
Regards Jason.
With some in the finance world expecting capital growth rates in residential property to diminish over the coming years, it would seem appropriate to challenge the validity of the buy and hold method as a way to building and preserving wealth. The loosening of credit in the late 90's and naughties gave rise to an unprecedented boom in residential property prices that is unlikely to be repeated in the near future.
While the investors who have been successful in Jan's book have adopted a number of strategies (developing, renovating etc) the majority of successful property investors simply bought multiple properties over time (sometimes over a period of 40 years) paid down debt and held on. They then kept buying when they could afford to. (Never overcommitting!)
There is a section in the book devoted to mistakes that investors have made. Some of them are chilling - tales of people loosing everything (substantial portfolios) due to careless mistakes. Others selling up to invest in term deposits, only to end up on the pension later in life, and still one other example of a couple who after 30 years had a portfolio with 3M in equity, only to loose it by acquiring a business or two without undertaking proper due diligence.
What are are you thoughts on:
1) Whether the buy and hold strategy is still an effective strategy for building wealth going forward? Is it still feasible to rely on being able to buy 10 properties and then balance the debt when you want to retire by selling down a few properties??
2) Is future growth sustainable considering the high price of real estate today?
3) Apart from relying on capital growth, what are you doing to speed up the process of accumulating equity in your portfolio?
4) Are you selling to balance debt as you go along, or selling to move your money into other ventures (be they property, shares, business or other?)
5) Or are you buying holding and accumulating more properties with the view to selling down to retire debt and live on rents in years to come?
* I am a buy and holder and the strategy is working well for me to date. But I am always interested to read other's views.
Regards Jason.