Are you one of the many that believes real estate is unaffordable? Think again.
Blogger: Peter Gordon, CEO, Investo Property
Because of my line of work, nearly every conversation I have with people — both at work and on my own time — somehow always reverts back to ‘property’.
Don’t get me wrong! I love what I do, and I could talk property and investing until the cows come home. They’ve been passions of mine for the last 20 years or so.
I’ve seen the highs and the lows of the property market. And believe me, the highs in the end always outperform the lows. Markets change, vacancy rates increase and decrease in cycles, interest rates fluctuate, but in the end it’s a numbers game.
I’m always asked: Is there a property bubble?
To be honest, I think not. Property prices can increase and decrease, everybody know this but very few people prepare themselves ahead of time for when this happens. You must position yourself so you’re able to ‘hold’ your investments until prices increase again — which will happen.
I’ve just finished a meeting and this very subject came up. During this meeting, we had two coffees, large ones as they were the first for the day. We were talking about investing, current markets, and sorting out plans for the weekend in that circular way conversations have. My friend asked about the next hot spot and how much it would cost to invest. I held up my mug and pointed to his.
“For about the price of these coffees per day.”
And so ‘The Latte Club’ was created.
When people say property is unaffordable, I’m generally left confused as to why they think so. It might be unaffordable if you haven’t saved a deposit or don’t have equity in a home. However, if you select the right investment property, the holding cost my not be as high as you imagine.
Let’s just simplify the holding costs by bringing them into everyday life, which is what The Latte Club does. On average, I have two coffees per day at $4 a cup. That’s $8 per day or $56 a week. This is a habit that is normal for most people. We think nothing of spending $56 per week on coffee.
Don’t get me wrong, I don’t want you (or anybody) to give up pleasures like daily coffee just to invest. The point is, we are happy to spend that money. We don’t mind the cost of the coffee or lunch or pizza and a bottle of wine. Those are the little pleasures that make life worthwhile.
The Latte Club simply puts the cost of your investment into perspective with what you are already spending in your everyday life. If investing in a $500,000 investment property costs only $60 per week, is it really that unaffordable?
Look at it as forced savings over time. It might be a lot for some or not much for another. The main consideration is to plan a budget in line with what you can actually afford. I myself don’t think that $60 per week is too much money to hold onto a $500,000 asset.
About the Blogger
Investo Property director Peter Gordon is committed to educating other Australians on why and how to invest in residential property. Holding a Diploma of Finance and Mortgage Brokering as well as a Diploma of Financial Planning. He firmly believes that investing is based on numbers. Understanding your goals first, having the right finance structure in place, working on an investment property strategy on where and what to invest in, making sure you have a balanced cash flow and buffers in place today, tomorrow and for your future.