Compound Interest in Property Investment

Some investors achieve wealth, security and early retirement. Others delay starting.

 

They come up with all the reasons not to invest now. 

Is there a cost to waiting?

Research tells us we’re living longer, and most will either run out of funds in retirement or face the prospect of retiring on the pension (don’t bet on it!).

 

Research also tells us only 1 in 100 is wealthy, only 3 in 100 are financially independent – not a very good outcome for working hard for 50 years.

 

The cost of waiting could be ending up with nothing and on a pension.

 


On the other hand, the earlier you start, the sooner you finish and the bigger your nest egg.

 

Think of the snowball rolling down the hill, small at first then gaining momentum and growing bigger and bigger closer to the end.

 

I am talking about Compound Interest, which Albert Einstein described it as the 8th Wonder of the World.
Let’s say you invested $100,000 at age 25 with compounding interest of 8%. By age 65 it is worth $2.5 million without investing any more funds.

 

Time and compound growth did all the work for you.
In the property world the power of compounding can be even more powerful. According to CoreLogic, the national median house price in 1993 was $111,524.

 

In 2018, it is $515,610. So, in 2.5 property cycles (1 cycle is 10 years), property values are almost 5 times more! The power of property is that you can leverage by using other people’s money (the banks) and having others pay for the investment (the tenant and the ATO).

 

Compounding growth and time work their magic to get results for you.

 


So why do people hesitate? 

 

Well, they worry about everything from interest rates going up, to having bad tenants, to maintenance issues, to property prices falling, to the results of the elections – all the what-ifs cloud their mind and moving forward is impossible.

 

There are always risks to investing, but these can be mitigated by having a sound investing strategy, guidance from people with industry knowledge and experience and being driven to towards the rewards investing can bring.

 


Thinking doesn’t produce results, taking action does. Speak with team at One Central Property to help you get started.