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Why Invest in Property?
Some people will argue that shares are better than property investment. True some shares do show a higher income return but they don't show you the HIGH risks involved. But the Key to investing is Leverage. Take this following as an example study.
Example, in the first year, the value of Mark's property increases by 9.8% - and John's shares go up by 12.6%. Which is the better investment?
| MARK'S PROPERTY | JOHN'S SHARES |
| Deposit $40,000 | Deposit $40,000 |
| Banks will loan 90% $360,000 |
Banks will loan 60% $60,000 |
| $400,000 @ 9.8% Capital Growth | $100,000 @ 12.6% Capital Growth |
| Return $39,200 | Return $12,600 |
Mark gets over three times better a return in property. Mark's equity has gone up from $40,000 to $79,200 ($439,200 - $360,000). That's a return of just under 100%. John's equity has gone up from $40,000 to $52,600 ($112,600 - $60,000): a 32% return.
So even if the shares have twice the 'growth' factor, the property offers more than twice the growth in true capital worth (equity) - simply because of its leveraging ability