Is It Worth Having Just One Investment Property?
The majority of investors own just one investment property and very few ever get beyond three investment properties. If you are starting out in property or already own one investment then you should ask yourself the question “is it worth having just one investment property?”
In this article we are going to cover the benefits of owning just one investment property and how it can significantly boost your wealth. We are also going to discuss how one investment property can be a perfect launch pad for building a huge portfolio of real estate investments that don’t just see you become financially free, but that allow you to live the life of your dreams
The benefits of owning just one investment property:
There are many benefits of owning just one property and I want to outline them for you so it is clear as crystal.
You can own a large investment for a small portion of the cost – You can purchase a large investment for 5-20% of the total cost. This gives you a great amount of leverage and can deliver a greater return on investment.
If you invest $30,000 to buy a $300,000 property then you get all of the gains on the $300,000 property (not just the 10% you put down). Thus if the property increases in value by 10% you would have doubled your money. However, if you put $30,000 into shares and the shares increase by 10% then you would only make $3,000 (not $30,000). One property can help you get a better return on investment if you invest well.
Long term capital gains – By owning a piece of real estate you are going to gain access to long term capital gains. My parents bought their family home for $120,000 back in 1988 and when it sold in 2009 it was worth over $800,000!!!
Those long term capital gains on just one property can set you up for a great retirement. You can sell it to access the equity or borrow against the property and live off the gains.
Rental income that creates cash flow – Generally speaking rent goes up over time, thus sooner or later your property is likely to become positively geared (earning more income than it is costing you in expenses). You then get access to a weekly or monthly influx of cash flow that you can either add to your wage (and live a better life) or invest for your future.
If you buy a positive cash flowed property to begin with then any increase in rental income is going to be the cream on top of the cake.
Security of investment – Property has shown itself to be a very secure investment. You can even get insurance for worst case scenario (losing your house to a fire or flood). How about getting insurance for your shares? If you share price plummets to 0 will your insurance company give you the money to rebuild your portfolio?
Time to focus on making your investment great – If you only one one investment property (not 100) then you have time and head space to focus on making that investment great.
Look for opportunities to increase rental yield and the value of the property. Keep the property up to it’s best standard so you can get the best return on invest and you could even focus on paying down the loan quicker so that it turns positive cash flowed sooner rather than later.
How one investment property can boost your investing career
Yes one investment property can be great, but more often than not if you do well with one property it just makes logical sense to invest in another. Your first property can be a great launch pad for building a huge investment portfolio.
Here are some of the ways that first property will help you build your portfolio:
Experience – This is the biggest blessing of all! Most people don’t invest in property out of fear from lack of experience. Getting that experience on your first property will set you up for success on your next properties.
Capital gains – When your property increases in value you will have access to the equity in that property (the difference between what you owe and what the property is worth). You can use this equity for a deposit on your next property so you don’t have to scrape and save just to buy your next property.
Track record – You will have a track record with the banks and you will have proved to them you can pay your loan on a regular basis. This could help you secure a second loan for a new investment property.
Rental income – If you managed to turn your property into a positive cash flow investment then it is likely that the lenders will count a portion of that rental income towards the serviceability of your loans. This could make it easier for you to secure a loan for another property.
So is it worth having just one investment property?
The answer to that question in most cases will be a resounding yes, if you invest wisely and make the most of your investments.
I recently read about an elderly woman who was completely supported by just 2 properties that she owned. She created dual occupancy in both properties. Lived in one half of one property and gained 3 incomes from the remainder. Enough to live a comfortable lifestyle.
One property may not make you financially free but it will go a long way to increasing your financial status and will give you
a) More disposable income (once it is positive cash flowed).
b) Access to a large sum of money if you need it (held in the equity of the home).
The question should therefore be:
Why should I stop at just one investment?