Buy Property, Build Wealth. It’s That Simple

What’s the best way to build wealth? Buy stocks, bonds, equities, gold? While other assets may have characteristics that make them more appealing than property, there’s no doubt that the property market is the largest market by far, and there’s a reason for that.

Ask any billionaire investor, and they’ll tell you that the way to get rich, at least to begin with, is to buy property. Warren Buffett, for instance, got his start when he bought an Omaha ranch for $400,000 nearly forty years ago. Though it was just a farm, it’s continued to produce an annual income for him ever since. He’s earned millions of dollars from his original investment: dollars that have helped to fund some of the shrewdest investments in history, such as his investments in Coca-Cola and Wells Fargo.

Buy Property, Build Wealth. It's That Simple - New England style house image

New England Style House Luxury Property

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Getting into real estate, however, is a different proposition than other investments. Some characteristics make it unique.

Perhaps the most important is that it is decoupled from fluctuations in other asset class markets. Property prices tend to ebb and flow more closely with wages over time – or the ability of people to afford the monthly repayments. Stocks and bonds less so. Property is also a cash flow generating asset because of the rental income it provides.

Lastly, property is usually bought with debt (a mortgage) unlike stocks or bonds, and so leverage is an important consideration. Because the asset will always exist, lenders are more willing to send you money to carry out a real estate investment project. And that means that just about anyone with a satisfactory credit rating can get involved.

Buy Multifamily Dwellings

Making money out of property investing is relatively straightforward, so long as you know what you’re doing. What you don’t want is a situation where the mortgage payments to the bank on the property exceed the rental income. And so you need to find ways to make each property generate as much revenue as possible.

One common strategy is to buy large, old-fashioned townhouses in areas that have seen a growth in the number of young, independent professionals. Markets in London, Indonesia, China and Brazil are ideal for this kind of purchase. The idea is simple: buy a large house and then divide it up into two, three or even four different dwellings.

The reason for doing this is that it is much easier to charge more overall when a property contains four separate dwellings. Each person is willing to pay a premium for the square footage they have, even if their living areas are small.

It’s also a good strategy for reducing risk. Rather than relying on one tenant to pay you rent every month, you have two or three different paying renters, making it much more likely that you will get paid at least something every month.

Why More People Don’t Invest In Property

Property investing has made thousands of people wealthy and given them the opportunity to rely on passive income rather than giving up their precious time at work. So why doesn’t everybody get involved?

One of the problems with investing in property is that it is difficult. You need to have the courage and the tenacity to stick with it, even when things get tough. It’s also complicated, especially when investing overseas.

Building A Portfolio Is Difficult

We’ve all heard about the difficulty of getting on the property ladder, and that same difficulty applies when it comes to building a property portfolio.

The problem with property investing is that it takes up a lot of time. You have to do more complicated accounts, make sure the properties are maintained and fit for habitation, and search for new investment opportunities.

Because of this, you need to have the luxury of time. If you don’t, you’ll be forever outsourcing these administrative tasks which will bump up your overall costs. And when your costs go up, all of a sudden renting out properties becomes far less lucrative.

Knowing Where To Invest Is Tough

The property market is one of the most eclectic in the world. And that makes it difficult to know where to invest, especially if you want to build a portfolio overseas. Sites like https://www.rumah.com/rumah-dijual/di-area-surabaya-idji29 give a flavour of the variety of properties and locations in the market, especially in emerging economies.

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Investors want a high return on their initial investment. It’s not just about rental income. It’s about building equity directly through price rises. Housing prices can rise for all sorts of reasons including population growth, local wage growth, lowering of interest rates in the domestic market, a lack of supply, and less strict lending rules. Factors that influence price vary from country to country, so as a property investor, you need to have your eyes and ears open to potential changes coming down the pike. Many investors, for instance, predicted the boom in house prices in the Silicon Valley and San Francisco area when they saw that the technology industry was kicking off. House prices in San Francisco more than tripled between 1990 and 2018, providing owners with fabulous amounts of equity.

You Need To Be Patient

Day traders and people who buy stocks are used to reaping the rewards of their investments quickly. Profits can be taken after months or weeks, not years. But that’s not the case with property. If you want to become a property investor, you may have to wait several years before making a return.

The good news, however, is that if you can wait, the rewards are excellent. Not only do you get paid money for doing very little, but you also avoid a lot of the risk associated with other asset classes. It’s not uncommon, for instance, for stocks to drop more than 50 per cent in a week: it’s happened throughout history several times. But rental prices rarely drop by that much, if ever. According to http://www.propertygeek.net/article/property-investment-without-money/ this makes it much easier to start a business based on property.

So there you have it: why the costs of investing in property are worth your while. Good luck.

Linking Insurance with Investment: Everything You Need to Know About ULIPs Explained in 5 Simple Steps

We all know how simple the insurance market used to be several years ago. They were simply ruled by endowment plans and terms, and everything was relatively to understand. However, this all changed when Unit Linked Plans (ULIPs) came into the life insurance sector.

Linking Insurance with Investment ULIPs explained - life insurance image

While ULIPs add protection to your life, they can also be used to help you accumulate wealth, which means they are an investment opportunity. If this is something you’re unfamiliar with, never fear. Today, we’re going to explore five important things you need to know when it comes to ULIPs.

#1 – The Costs

This is perhaps one of the most important things you’ll need to know about when investing in a ULIP. There are several expenses that come with ULIPs, which include administration fees, fund management charges, mortality charges and more, depending on which one you invest in.

Whatever the case, make sure you’re aware of the charges that come with a ULIP since they will occur on all of them. Some costs won’t be fixed, and many will start high but will reduce after three years. You’ll need to bear all this in mind when it comes to your investment plan.

#2 – Paying for Premium

In addition to the costs involved, you also want to be aware that you have three payment options available when taking out a ULIP. With regular payments, you’ll be able to pay the entire term of your policy for the duration of your policy.

A limited payment means you can choose the number of years you want to pay for your policy, whereas a single payment means you can make the entire policy in one go. There are various benefits and savings to each, but this will depend on your provider.

#3 – Tax Benefits

While we might have been putting you off with all the costs, it’s worth noting that you can expect tax benefits when you’ve invested in a ULIP, thanks to Section 80C. But, the condition that the premium paid needs to be less than 10% of the sum assured.

However, this value is subject to change along the duration of your policy and can become a much higher value as your premium ages.

#4 – ULIPs are Flexible

When you’re taking out a ULIP, you’ll have the ability to choose how you want your funds to be allocated when necessary. However, as time goes on, your priorities can change, and you may want these allocations changed.

Luckily, thanks to the nature ULIPs, this is easy to do so, although you may have a limited number of changes per year, or there may be a small switching cost.

#5 – The Risk Factor

As with any kind of investment, there’s always going to be risk factor, and this will depend on the nature of your investor. You may have someone who is aggressively investing in equities or perhaps a more conservative investor who invest in money and debt markets.

When taking out your ULIP, it’s important for you to pay attention to the type of investor you’re using, so you can find the one that works best for you.

Summary

If you’re planning on investing in a ULIP policy, these five points are important considerations when it comes to what you need to know. Make sure you’re not rushing the decision when it comes to choosing the right investment/insurance plan for you, and you’ll be able to benefit greatly in the long-term.

About AEGON Life

AEGON Life Insurance Company Limited launched its pan-India operations in July 2008 with a vision to be the most recommended new age life insurance Company. AEGON is one of the world’s leading financial services organizations (providing life insurance, pension plans, and asset management) and Bennett, Coleman & Company (India’s leading media conglomerate) have come together to launch AEGON Life Insurance. This joint venture adopts a local approach with the power of global expertise to facilitate a direct to customer approach, leveraging digital platforms to bring transparent solutions to customers and to prioritize their needs.

 

Teaching Teens About Investment: The Basics

As a parent with teenagers, you are likely to be worried about their financial futures. If economists are to be believed, millennials could be about to become the first ever generation to be less well off than their parents – so there is obvious cause for concern.

It has never been more important, then, to teach your young adult children the vital importance of saving – and investing in their future. I’ve put together a few ideas which should help you explain – and demonstrate – some of the concepts of investment to your teens.

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Develop their interest in world affairs

Knowledge of global events and their impact on the markets is critical for investors, so encourage your teen to keep in touch with the news. OK, so if you are anything like the average family, your teens are likely to turn off when the news comes on. But, you mustn’t mistake this for disinterest in current and world affairs. There is a good chance that your teens have a keen interest in what’s going on in the world they just choose not to listen to a mainstream voice. Encourage it, of course, but start telling them the benefits of fact-checking and investigating sources. It will prove to be hugely beneficial when it comes to the day they start making investments.

Offer them allowance deals

If you are still giving your teen a weekly allowance, see if you can show them the benefits of putting money way and saving it. For example, let’s say you give them $10 each week. You could suggest that if they gave you back half and save it for 6 months, you would match what they have kept back, doubling their money. Not only will it show them the value of putting money away, but it will also teach them a little about interest and making their money work harder.

Get started on real estate

Buying and selling homes isn’t something your kids will be doing for a while yet. But that doesn’t mean it isn’t a subject you should be discussing. Educational games can help the younger ones, and Monopoly is always a great way to introduce the concept of investing money in property to get more back. If you have the money, you could, potentially, look around for cheap homes for sale, buy one, and let them run it as a business – assuming they are old enough, of course. There’s nothing to stop you from investing in property as a family business, either. You could, perhaps, give everyone tasks they are responsible for and pay them out of any profits earned. Finally, ask their advice. Too many households shield finances from their kids, but being open and honest will help them learn and, most importantly, ask questions.

Talk about the stock markets

Teens love modern technology and big brands – and there is a perfect chance there for you to take their interest further. You could even set them up with a little stock to play with, and see how the markets fluctuate for themselves. As long as your teens have a grasp of money and are interested in the subject matter, it should be easy enough to peak their interest in the relevant markets.

Do you have any suggestions on how to teach teens about investment? Let me know your thoughts in the comments!

 

Before You’re 30: Steps To Real Financial Independance

If you’re reading this, you’re probably somewhere in your early to mid-20s. You’re starting to make your own money and maybe even starting to see a little of it become disposable. We know that you might have all kind of costs that demand a big chunk, but that extra could help you become truly financially independent. Here are the steps you could take.

image of American coins - the importance of saving

Picture by Jeff Weese

Stop using your credit like a cookie jar

Half the country’s millennials have never checked their credit score. That’s a shocking fact, but the fact lies on those who failed to teach them about credit. When you’re young is when you’re most likely to ruin your credit. It’s time to stop using those open lines of credit unless you’re prepared and able to pay them off now. When it comes time to buy a new car or a house, you’ll be thankful.

Start dealing with debt

If you’ve already dipped your hand into that cookie jar one time too many, it’s likely you have some debt to deal with. Start learning debt elimination strategies and plan your approach to it. Stop charging things to your credit cards and cut out some of your luxuries to start paying more than the minimum.

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Building a nest egg

There are no two ways about it, you need to start saving right now. It’s easy to blow through your free money before you have the chance to save emergency funds. The trick is to put the money into savings, first. 15% of your income should be going to building those funds. They’re essential. Failing to save them could mean getting into a debt spiral or even falling bankrupt due to a financial emergency.

Get protected

Other financial emergencies can be taken care of without much heartache thanks to your insurance. By the time you’re thirty, there are some policies you need to be taking care of. If you have a car, you need auto insurance. If you have a place, you need property insurance for at least your contents. Disability insurance is an important confirmation of the fact that life is uncertain and we don’t always know how able we will be to work. Life insurance is needed because as uncertain as life is, you don’t know when it might end. You don’t want to put your loved ones into hardship because of your failure to prepare.

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Time to start preparing for retirement

No, thinking about retirement isn’t for older people only. The sooner you get started on it, the better it’s going to be for you in later life. Talk to your employer about 401(k)s so you can start saving automatically from your income, or an IRA or Roth IRA if your employer doesn’t provide 401(k) contributions.

Start investing

Roughly 20-30% of your whole income should go into financial preparation. After you emergency savings, debt relief, retirement, and insurance payments, you’re pretty much protected. If you have any extra cash after that, it’s time to start building it. Look into learning about building easy, set-and-forget investments to begin with. As you start building a portfolio, start learning how to manage it more actively.

The clock is already running. Make sure that in ten years from now you’re not in the same financial situation you’re in now. Lay the groundwork for a truly successful future.