Have you ever wondered why the rich seem to get richer and the poor seem to get poorer? It's simply because the poor "invest" their money, usually borrowed, into things that make them feel (or look) wealthy - like cars, boats, clothes and household items like wide screen TV's that inevitably decrease in value. The rich however invest their money, again usually borrowed, into those things that actually increase in value - such as property. So here we start to see the difference between "bad debt" where we borrow to buy things that depreciate - like cars, and "good debt" where we borrow to buy things that appreciate and produce an income - like rental properties.

 

 

But how do you build wealth through property? What's the game plan? And when do you get to enjoy it all?

Firstly let's stop for a minute and have a look at what most people do with their finances, and see how you can improve on that.

Ok most people start working a job at an average age of 18 and continue to work at that job until they retire at an average of 65 generally just making enough to pay the mortgage on the family home, they then retire (hopefully with a paid off home) and then can expect to only live for on average 7 years.

So in summary - Work for 40 odd years, then retire for just 7. (It's just not right)

Well how would you like to turn that situation around! by working a little smarter for approx 5-7 years, then spend the rest retired or actually out enjoying life while you are still young and able. (Now that's more like it!)

Well by investing in Real Estate alone, you can do just that (as I have). You can look forward to an early retirement and total financial independence, and if you have already got some equity in your own home you're well on your way! Using your own home as a base, you can borrow against the equity in your own home to buy a rental property. And by using a combination of buying well as well as adding value quickly by minor cosmetic renovation you can create more equity to repeat this process and then buy another property ........ and then another..........and so it goes on. (Note by using this strategy we are not having to wait for capital growth to increase our equity to enable us to purchase the next property, we can build a large portfolio very quickly by using the above method).

This way you can borrow 100% of the purchase price, with no need for you to put in the normal 10-20% cash deposit like you probably would have when you bought your first home, which is a big bonus, as how long did it take you to save up that first deposit?).

While you are still working (or have income from business) you continue to buy rental properties until you decide enough is enough and you decide to retire. You could then sell off some and clear or reduce your debt level and live off the rental incomes from the remaining rental properties. Also once your portfolio and total rental income becomes larger it becomes much easier to continue to get mortgages without you having income from a job.

For those of you who have scraped and saved all these years to make a dent in your first mortgage, you'll be thinking - why should i go back into debt? But what you should know is that borrowing to buy the next property as an investment is much easier. Why? Because the debt on this next rental property is paid for by two other people - not just you. The tenant and the tax man help pay your interest bill and you are left to pay the remainder. And it can cost you less than $100 per week to get started. Sometimes there isn't any remainder left for you to pay, but there is actually excess rental income left over after you pay the mortgage interest. (We like this a lot, as this can provide us with extra income, we call this type of property "positive cash flow") That's why borrowing to buy investment property is so much easier than borrowing to buy your own home, where YOU have to pay the lot.

Understanding Capital Growth and Compounding Growth

One of the most important principles of building wealth is the use of rate and time. It takes time to build real wealth and your mind needs to expand beyond thinking from one Christmas to the next if you want to achieve secure wealth. I'm sure everyone has used the old adage that something or other "breeds as quickly as rabbits". This is because we all know that a pair of rabbits produces several more rabbits, each of which produces more rabbits and so on and so on. And before you know it, there are millions of them. If only we thought of money breeding in the same way - and it can - if only you put it in the right places and give it time.

For example if you started on day one with just $1 and could invest it in something that would double your investment everyday and you kept re-investing, by the 21st day you would have over 1 million dollars - How can this be? See your $1 turns into $2, then the $2 turns into $4, then $4 to $8, then $8 to $16, $16 to $32 and on it goes until you get to day 21 and have a whopping $1,048,576. Do the exercise on a piece of paper yourself. Then if you went on to day 22 you would have $2,097,152.

Do you see how the growth starts to reach a "critical mass" point, where from there on the growth becomes expediential. Ie. the growth compounds upon its self automatically.

Once you own enough rental property this is exactly what happens. On average property doubles in value every 7-10 years (in some places and instances it can be much less than 7 years). So for example lets say you owned 1 home worth $200,000 that had a capital growth rate of 10% per year, you would have a gain of $20,000 per year, so borrowing against that extra $20k of equity gained, you could now re-invest and go buy another property to the value of $100,000 (this is assuming borrowing at 80% Loan to value Ratio - LVR, which is a normal criteria for most banks worldwide)

However what if you owned 10 rental properties, each worth $200,000, so a total value of $2 million, then you got the same 10% capital growth per year, your gain in value per year would now be $200,000, which when you borrow against this new equity you could buy another $1 million of property, which you will then continue to get capital growth on. Can you see how this can mutiply very quickly (just like the rabbits) and if you kept doing this for at least 5-10 years your net worth can become very very large.

This strategy isn't new, people have been doing this for years and years. This is how Mega Moguls the likes of Donald Trump can become so wealthy by continuing to invest in Real Estate over a long period of time.

This is exactly the property investment strategy that I have successfully used over the last few years. It is actually quite simple, but there are many other little parts to it that you need to understand and get right for you to be successful and make life easy for yourself. For example:

• How to spot and source great property deals
• How to get agents working for you
• How to buy property with "No money down"
• Negotiating to win, making your money when you buy
• How to crunch the numbers
• How to put together sales contracts that give you the control
• Get mortgage finance when others can't
• Keep buying an unlimited number of properties
• Different strategies to make quick cash as well as cash flow
• How to structure your portfolio to balance Capital Growth with Cash flow
• How to take best advantage of tax benefits
• And much much more

If you think that investing in Real Estate is for you, I would suggest you do as I have and read as many books as possible and attend some dedicated Property Investment courses etc, generally learn as much as you can on the subject - and as I have found out "the more you learn the more you will earn"

The money that I have invested in my investment education has paid me back many many many times over and still continues to do so - Invest in yourself, it will pay you back forever!

If you live in New Zealand click here to see the NZ recommened Property Education Page

One of the best Property Investment books I have ever read is this one by World renowned Investor, Dolf de Roos. It's a great place to start!

Click here to order

Building Wealth through Investment Property This book provides the wealth-building strategy that offers a reliable path to riches in ten years or less by investing in residential property and using the equity in your own home.

 

Dolf de Roos also runs a great "Property Investment School". I fully recommend getting his 2 day course on CD so that you can go over it at your own pace and re-do it time and time again. (You can even listen to them while in your car, or put them on your ipod)

Click here to order

Property Investor's School CD Set This 10 CD set is a live recording of the 2-day event Dolf teaches. It contains over 10 hours of audio learning and an interactive 100 page workbook to be used in conjunction with the audio allowing you to work along with Dolf as he takes you through individual investment processes. What You will learn from The Property Investor’s School: How to determine where to look for lucrative properties in your territory How to choose a real estate agent to work with How to analyze a property to determine if it's for you How to obtain financing How to make your offer extremely appealing to the seller How to negotiate effectively How to apply for a mortgage with little chance of failing How to borrow more than the purchase price with the bank's approval How to write and present the Proposal for Finance How to massively increase the value of your property without spending much money on it How to manage your property effectively and efficiently Should you flip or hold the property? When should you move to commercial property? Moving into commercial property What to look for in commercial property The differences between commercial and residential property How to read the commercial lease contract How to keep your commercial tenants How to let non-performing commercial tenants move on to make way for paying tenants And more!

When i first started out with my property investing i joined a Property Investment Mentoring Program, which I found to be of huge benefit whilst i was learning, as it gave me all of the indepth info, confidence and support that i needed to be able to go out into the market and start building my portfolio.

Dolf offers an online mentoring program, that you can access from anywhere in the world, which would be a fantastic resource for any budding property investor who wants to be successful.

Click here to order

Discussions with Dolf This forum is designed to educate and motivate you on a multitude of real estate investing subjects. You will receive emails containing both audio and video recordings from Dolf in which he addresses specific real estate topics as well as answering previously submitted investment questions from program participants. Subscription to this mentoring program will be charged on a monthly basis.

When you start investing you are going to need some tools, just like a mechanic needs a set of tools when they repair your car. The most essential tool you will need is some type of analysis software to crunch the numbers of properties you look at when assessing if you should buy them or not, yes thats right it's all about the numbers. This was one of the best investments I have made, which has enabled me to quickly analyze potential property purchases to work out what my investment returns will be, and the maximum price I should pay etc. You can download the software or have it physically sent out for a little more.

Click here to order

Real Estate Acquisition Software - Download REAP is the most powerful property analysis tool of its kind. REAP will assist you in consistently identifing lucrative investments and, more importantly, avoiding bad ones.

 

To see a full list of all of Dolf de Roos excellent Property Investment resources, click the box below.

 

As you can tell I am very passionate about Real Estate Investment, it is a lot of fun, and best of all very profitable. It has been good to me and I hope that I have inspired you to take this opportunity to gain some knowledge and start learning some new skills that you can put into play out there in YOUR Real Estate market and achieve some great results yourself - and once you have, send me an email and tell me about it.

Best regards,

Clint Taylor