Promoted by Momentum Wealth.
Looking ahead towards retirement and financial independence can be a daunting prospect for people in their 20s, and one that may not seem pressing in their current circumstances. With immediate concerns like paying off student loans, kick-starting a career and ticking off the bucket list before starting a family, the thought of building that lucrative property portfolio is likely not a top priority for many young professionals.
When it comes to property, however, there’s a very real reason why younger generations should start looking towards their long-term goals sooner rather than later. Many people don’t recognise this, but investing early could be key to securing faster financial independence and, most importantly, generating greater wealth in the long run. Think of it like planting a tree – the sooner you sow the seeds, the sooner you can reap the rewards of your efforts.
Bigger benefits from compound growth
If there’s ever proof of the benefits of investing in property early, it’s in the concept of compound growth. Compounding is when an asset’s earnings, from either capital growth or interest, are reinvested to generate greater earnings over time; in property terms, you’re profiting from the year on year growth of your assets. Let’s say a property valued at $500,000 generates a return of 5% per year. After the first year, that property will have grown to $525,000. Providing the investor doesn’t withdraw these additional earnings, the 5% growth rate will then see the property grow to$551,000 the next year (and so on), with the property’s value increasing exponentially as time goes on.
Since compound growth is exponential rather than linear, this snowball effect won’t have a huge impact immediately; however, it could see young investors making big long-term returns as the compound growth accelerates over time.With an average annual growth rate of 5%, that $500,000 property would be worth over $814,000 after a period of ten years, marking a huge increase in value. The sooner young investors therefore purchase that high growth property,the sooner they can start accumulating wealth, which they can then leverage to build a more lucrative property portfolio.
Patience pays off
The key to profiting from compound growth, and property investment in general, is patience. The longer an investor can hold onto a property, the more profit they can make through its compounding value. Whilst investing early will see young investors accumulating wealth faster, an even bigger benefit is that it will allow them to hold onto the property for longer, which can have an immense impact on their final returns.If we go back to the previous example, an investor who holds that very same $500,000 property for a period of twenty rather than ten years would be left with a property worth over $1.3 million, which is more than double the value of the initial investment.Waiting this long may not be a possibility for investors who enter the market later on in life, but can be a huge benefit for young investors who purchase property early and have the time to hold on their side.This can become an incredibly lucrative strategy for investors who add multiple high growth properties to their portfolio.
It’s never too early
Investing in property can be an intimidating prospect for young investors who are unfamiliar with the property market, but starting the investment venture early can also bring undeniable benefits when it comes to accelerating long-term wealth creation. Like any investment,the key to property investment success lies in the research, planning and professional advice investors seek. If you are a first-time investor thinking about purchasing a property, this beginner’s guide to buying investment property by Momentum Wealth is a great place to start.
Momentum Wealth is a research-driven, fully integrated property investment consultancy dedicated to helping clients build multi-million dollar property portfolios.
We offer a premium, advice-driven service helping clients in the planning, financing, acquisition, development and management of their residential and commercial investment properties. This holistic service offering provides a one-stop shop for clients to accelerate their wealth and reach their property investment goals sooner.
If you are interested in finding out more about the contact us today.market, or wish to have an obligation free chat to one of our knowledgeable buyer’s agents,