Have you ever thought about the role of time in property investment? Read on to know why time is an asset for a property investor and start investing today.
Why Is Time an Asset for a Property Investor?
Time, they say, is gold. It may be cliché, but it’s an adage that continues to hold true, especially when it comes to investing. Whether you’re talking about preparing for your future by saving, purchasing an investment property to earn rental income, investing in equities, or starting a business, time is of the essence. This, then, means that time is an asset for a property investor.
For example, the earlier you start saving, the more you can earn in interest rates and build wealth faster through the years. The same can be said for real estate investments — the rental earnings you accumulate from a rental property would be hugely different if, say, you bought it in 1995 than if you acquired the same property in 2005.
So, the sooner you start investing in real estate, the more opportunities you have in achieving your investment goals.
Time — an asset for a property investor
Time matters in property investing. After all, what was true 10 or 20 years ago may no longer be true today. Locations change, with some deteriorating commercially through the years or becoming industrialised (thereby affecting residential prices), whilst others remain steadily in demand. More importantly, what opportunities were readily available to property investors decades earlier may already be scarce today.
However, there remains the clear implication of time on property assets, and these are the reasons why:
- Property loans have a long tenure: If you take a 20- or 30-year loan to buy an investment property such as a single-family home you plan to rent out, you will no doubt find the first few years financially challenging. Most of the rental income would have to be paid toward the loan, maintenance costs, and taxes. But if your property is in a good location, you can reasonably expect rental prices to rise steadily and eventually earn good rental income in the process — long after you are done paying off your loan.
- Real estate is finite: The changing value of real estate lies in the fact that land is limited or finite, whilst the population continues to grow. This is especially true for residential property as more and more people accumulate wealth and plan to purchase their first home.
- Property value historically grows over time: The real estate industry is cyclical in nature, so it suffers from highs and lows. If you’re fortunate enough to time your property purchase during a market downturn, you will find yourself receiving positive cash flow once the market rebounds and there’s a strong sellers’ market. However, even if you don’t get a good deal right away, just be patient and play the waiting game (this is necessary for property investment). In 20 or 30 years’ time, property prices may have risen to a point where you’ll not only recover your initial investment (plus taxes and other fees), but also add substantially to your real wealth. In Australia, this pattern of property price increase is quite apparent in cities like Sydney and Melbourne. One study following Australia’s housing trends over a 25-year period shows that from among Australian capital cities, Melbourne experienced the biggest increase in property values, with overall median house prices rising by 8.1% per annum, followed by Sydney where prices grew 7.6% per annum.
So, time truly is an asset for a property investor — and one that should never be taken lightly.
Make time a fundamental element of your investment strategy.
Property investors who are in it for the long haul have got the formula right.
And although there are market conditions where investors in it for a quick profit succeed, genuine real estate investors always look at the long term where the risks are lessened considerably and gains are more reasonably assured.
So, if you’re looking at investing in property, learn about the fundamentals and be diligent in your research. More importantly, start investing now while you still have years ahead of you.