Property is a valuable asset, for some it is purely a financial investment while for others, it is of hugely sentimental value. More often than not we either treat the property as a mere investment with no desire to actually live in the property, or as a family home with intentions to create long lasting memories and emotional connections. But rarely both. The question we want to know is can one property be both? A true home while being a strategic financial investment.
From the outset you need to be clear about your intentions.
Knowing why you want to buy a house, and understanding both your short and long term goals is key when thinking about whether your property can be more than just a home. If you truly understand and know all that you want a property to be, it can help you formulate a clear short or long-term plan to get the most out of it, including when and where to make financial investments and whether you can create wealth in a home.
It is possible to create wealth from the home you love without a 20 year wait.
Property can help you create generous amounts of wealth over the years. It is said that real estate builds wealth more consistently than other asset classes as there is stability with real estate even when short-term market conditions dip which is why many Australians are eager to enter the property market.
In thinking about whether a property can be a home and an investment in the short-term (say within 5 years), we encourage buyers to think about more than just the house, but consider the neighbourhood and lifestyle. What are the growth plans for the neighbourhood that will impact liveability – schools, transport, access, parks, beaches and so on. Is this a place that others will want to live due to the lifestyle that the location provides? Is this a place that you see others will pay to live in the future? Review the recent price trends in the neighbourhood and see what is projected for the next 5 years. These can be good indicators for property growth, and whether or not you may be able to generate wealth from a home once you’ve outgrown the property, and are ready to move on.
Consider the difference between maintenance and investment in your property.
Whether an investment property or home, ongoing maintenance is a must. It helps keep the essence of a property alive, reflecting the pride you have in that property. For homes it personalises a place, to fit the needs of you and your family so your house becomes a home and place you love. Maintenance requires ongoing attention, usually with smaller but regular financial expenditure compared to investments. Think of it as a gardener (maintenance) vs a new landscape or a pool (investment). Investments into your property typically are larger, more substantial one-off costs that add features to your property like an additional living area, or modern kitchen. For some an investment via a renovation may help prepare your property for sale. Investments in a home can help to increase the value of a property and generate wealth.
What other factors generate wealth creation by owning a property?
If a large investment is not financially viable, smaller contributions can still lead to an increase in the value of the property. In addition to these approaches, there are many financial reasons how real estate generates wealth. For example; you can generate cash flow from rental income, experience value appreciation over time, increased earnings through depreciation, improved income with tax deductions and bigger earnings through inflation – just to name a few!
Can you have a home and wealth creation? Yes! It just depends on your personal financial situation and long-term plans as to whether you want to live in the property or treat it as a means to grow your wealth in a shorter time frame and sell.