Tips and tricks for creating property wealth

Private Property South Africa
The Roosting Venus

There’s something very satisfying about cleaning up after a dinner party, especially when the conversation has been good and the menu a winner. In fact I often find myself smiling as I scrub while mulling over something clever that someone said or a scintillating moment.

Last night’s dinner was no different, and when the conversation turned to wealth creation it got even better. Just what, we wondered, do the really wealthy do, or know, that is different from the man in the street. Unsurprisingly, a little thinking produced some serious matter for thought – and an immediate lead to our number one tip:

Invest in yourself

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Make it your business to know and understand as much as you can about financial matters, money management, investment options and wealth creation. For a start the mere knowledge of basic principles in these matters will bring new ideas to the table and open new doors for you.

Keep control

Whether you earn millions or much less, it’s important to always keep control of your money. This means never investing in something you don’t understand and staying away from investments that are complex, shrouded in jargon or require expensive advice and management.

Have long-term vision

Ditch short-term gratification and emotional decisions in favour of a long-term plan which leads you towards achieving long-term financial objectives. Stick to these plans regardless of short-term market fluctuations.

Focus on income

Invest in assets that generate ongoing, inflation-linked, passive income for life. Examples include investments that pay dividends or royalties, a patent, a franchise operation or a property that is rented out.

How to achieve these things is always the question that follows and property is a ready answer. With many of the world’s wealthiest owning substantial property portfolios - around 50% of the world’s wealth is held in property - it offers, generally, a relatively straight-forward investment alternative that is easy to understand and promotes income-earning abilities.

  • Use a hybrid of strategies to grow your property portfolio, depending on the property in question and the state of the market at the time you invest.

  • Start with residential property – it’s easier to understand and manage.

  • Have a deposit ready - putting down at least 20% to 25% opens you to better terms.

  • Seek out development – pay attention to areas where there is new development or redevelopment.

Buy-to-hold

Involves investing in a property with a long-term view of 10 or 20 years, in order to benefit from the natural long-term capital appreciation of property. As the property’s value increases over time, the equity (the difference between its market value and the bond) can be used for further investment.

Buy-to-sell

Involves short-term gains by buying property and reselling at a higher price. This strategy can show great rewards in times when property prices are increasing rapidly, but can also lead to big losses.

Fix-and-flip

Involves buying a “bad” property in a good area, adding value by upgrading, and selling at a profit.

Buy-to-let

Involves buying property to rent out and should be good for ongoing, passive, inflation-linked income as well as ongoing capital growth.

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