Are you eager to create a greater level of wealth?
I know a lot of people are reflecting on their personal situation during these times of change and are looking to improve their circumstances.
While thoughts are important, the more difficult part becomes how and where to start?
I have focussed in on 3 key factors that I believe can have the greatest impact, as you start your journey.
These are factors within your control, but there are also some outside of your control.
Although I am talking specifically about property investment as a vehicle in this article, the principles can be replicated.
So, here are my thoughts:
It is you who has the greatest impact on your wealth.
That may seem like an obvious statement, but to some it may be hard to comprehend.
Some may feel that there are outside influences that dictate their life path or in this case, their level of financial success.
There is no doubt some people have had major setbacks or at a distinct disadvantage and need to overcome considerable odds.
Others may feel like it is the government, their parents, or their boss, that holds the key.
But once they take responsibility and realise that they can control their own future, things begin to change.
I believe that education is the key and a vital first step to changing and fine tuning your mindset.
Something that sounds so simple can often be the most difficult to take control of.
Once you have control of your mind and direction, you then must take action!
There is no doubt you will need to take on a level of debt to build greater wealth.
The rules continually change and investing in property is now a game of finance with a few properties thrown in.
There has been a steady drive from financial regulators and institutions to focus heavily on serviceability over equity.
Many sales strategies and books are having to be rewritten and changed, as the days of buying 10 properties in 10 years or racing from 0 – 100 properties are long gone.
Your ability to continually borrow more money will dry up faster than the multitude of opportunities that will arise.
So, it is solely about choosing quality assets over the number of assets, as your serviceability will run out regardless of your income level.
I have spoken previously about your salary not being the most important factor for building wealth.
It will be the ability to leverage your money into superior opportunities that then compound as quickly as possible.
Therefore, prioritise and maximise your financial capacity.
I would rather own one A Grade asset in a prime location over several in a secondary location.
Which leads me to the next key factor…
3. Property selection
Now you are in a position to take action and you have your finance in place, the next step is selecting the right property.
But what is the right property?
You may feel the answer is a property with cashflow that is not negatively geared, others want to minimise tax and many want depreciation.
While these are all important, they are secondary considerations.
The best property is the one that gets you into your next property faster!
That is how you build a greater level of wealth.
It will not be cashflow or tax benefits, importantly it will be how fast your property can grow in value.
It may take you 5 or 6 years to use cashflow to save for a deposit, but with above average, wealth producing rates of return, this could be achieved in half that time.
By accumulating high growth assets, your wealth will grow faster than what you will be able to save by building cashflow.
The first critical step to improving your circumstances and building a level of wealth, is to understand that you hold the key.
You are in control of your destiny and it is not in the hands of others.
Once you understand this, your next step is to understand the rules of finance, so you know how to maximise your opportunities.
A pay rise or more cash flow may be beneficial in the short term, but it will not grow your wealth fast enough.
It is more important to leverage your funds into the right property, that will then compound and accumulate at a higher rate than just an average property.
This will then allow you to repeat the process over time to build longer term sustainable wealth.
Brett Warren is a director of Metropole Properties in Brisbane and uses his 18 plus years property investment experience and economics education to advise clients how to build their portfolios.
He is a regular commentator for Michael Yardney's Property Update.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.