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Empower Wealth Blog post by Empower Wealth

Residential Property Investment: The Overlooked Wealth Management Tool

Whether you are exploring ways to grow your wealth for the first time, or whether you are already well on your way, it is essential to have a plan that details what you want to achieve, which investments you are going for and how you are going to achieve your goals. With investments such as shares, FOREX, bonds, where the market is live, there is always the ability to instantly see your wins/loses causing plenty of excitement and in a lot of cases they don’t need lots of money to start investing.  An alternative option sometimes overlooked is to invest in residential property. Why? Because most people feel that you need to have a large pool of money to start and it takes a long time to see your ‘winnings’, but this is not necessarily always the case.
Before examining some of the options, there are a few things to keep in mind. The first principle is that wealth acquisition is generally most successful when approached with the perspective that wealth accumulates steadily over time rather than quickly overnight. While winning the lottery or buying shares just before they come into high demand has worked for a few people, but for the vast majority these are not ways that most people increase their wealth to a position of self funding retirement. Second is the idea of balance. Even if you plan on getting into residential property investment, you should consider how to balance your wealth accumulation and make sure you know how to diversify your portfolio.

Traditionally financial planners know very little about what makes for a good property investment location or a good type of property to invest in, so you are best advised to talk to a Qualified Property Investment Advisor about investing in property, and talk to your financial planner about other investment options such as shares, managed funds etc just so you can have an understanding of all your options. This way, if you choose to invest in residential property, you can be confident you have made an improved choice.


Why Residential Property?

Before you start investing in residential property, it is important to know what it really means and what some of its benefits are. In the simplest sense, residential property is property that has been zoned for occupancy by a single household. This could be a house, villa, townhouse, flat or apartment. As oppose to commercial properties, residential properties cannot be used for mass commercial purposes.

One of the benefits of owning residential property is that it is a very tangible investment. This means that owners can see and touch their investment.

Its physical presence also brings us to another advantage: Control. If property investors want to increase the value of their property they can make small improvements such as a fresh coat of paint or a new built-in wardrobe, or if they are looking for some massive value add, they can opt for bigger renovations such as a new kitchen or perhaps even a restructure. Likewise, some of the costs are easier to understand and plan for because they are similar to the costs of maintaining their own home.

Another important benefit is that residential property investment is generally a safe option over time. While housing markets do rise and fall, as long as you have tenants in the residence, you will usually still continue to make the money necessary to maintain your investment. Technically, if you have selected the right asset in the right location at the right time, investing in residential property is relatively a set-and-forget investment. However, this is much easier said than done because how do you look for an investment grade asset? This is why we always encourage people to speak to a property professional or Qualified Property Investment Advisor before they start investing because investing in a residential property is a simple concept but it is not an easy one.


So, how do you start investing in Residential Property?

Now that you understand some of the basics and benefits of using residential property to grow your wealth it is time to understand some of the steps to take.



There is a lot of research that goes into buying an investment property. Initially you will need to establish a team of specialist in the following disciplines like mortgage broking, buyers agents, property managers, tax advisors and the captain being the property investment advisor. You need to be comfortable with this team and ensure they are all on the same page – building a passive income for you.

Once you’ve found a team, the research starts with identifying the right location and by location we mean starting at the very top. At Empower Wealth, we start by identifying the right city to invest in now, then you drive down to the local area, then suburb and then street and finally, the property itself. So when looking for a property investment advisor, be sure to find one that is independent and qualified and takes their time to understand your current financial position and future plans. Despite the level of awareness being raised by the media, many so-called property investment advisors are still providing off-the-shelf solutions to investors. Well, we don’t think that is necessarily in the best interest of the investor. Each investor’s household is different and unique, hence requiring a customised strategy to help them achieve their financial goals. On top of that, look for advisors that have experience buying properties that are within your scope and budget and make sure you hire one that has an established team or network of brokers, real estate agents and lenders we highlighted earlier. This can save you a lot of time.

On the other hand, when researching a property, make sure you consider more than one option and keep an open mind.

Some common mistakes that people make are refusing to learn and mixing emotions into their investment. For example, some investors are keen on buying holiday homes that are located in vacation or tourist areas. They may think that this location makes for a higher rental price, or they may want to use the property for their own vacations but the truth is, the level of income from holiday homes can often be lower than an investment property that has a full time tenant. On top of that, you need to consider the capital growth aspect of the property as well and holiday homes generally do not have a high appreciation in value. Either way, when comparing incomes, holiday homes do not make the best investment properties but an investor might feel the emotional attachment to the property and lose their investor’s mindset.


Save a Reasonable Amount

Property-investment-services-‘Piggybacking’-Property-Investment-StrategyOne of the major hurdles to understanding how to invest in property is failing to calculate the costs. Not only will you have to save for a down payment, but you will also need to understand other costs such as the property appraisal and inspection costs, loan fees, and your professional fees payable. Keep in mind that the first home buyers grant does not cover investment properties. A lot of investors think that they need at least twenty percent of the loan amount as a down payment. That is true to some extent but remember that you can borrow more than 80% of property value with the additional cost of Lenders Mortgage Insurance. Although this means that you have to pay more money for the loan, what it also means is that you get to enter the property market sooner. Apart from this, there are also other options where you can start climbing the property ladder, by using equity in an existing property, learn more about this here: Get on the Property Ladder Sooner.


Get Yourself a Plan

Developing a property investment plan is one of the most important things you will do in this process. Some of the considerations already mentioned, such as saving enough money and researching properties, are part of the overall plan. Additionally, think about your cash flow, what your overall financial goal is and what specific steps you need to take to reach it without affecting your current lifestyle. Some other questions that you need to ask yourself is how many investment properties you will need to achieve these financial goals, what kind of investment strategy you will need and how much income you want to have at retirement.  It’s not easy listing all of this and organising them into a plan but remember what was mentioned earlier: investing in residential property is a long-term option for growing your wealth.  The wrong move or decision could set you back years and in some cases could spell the end to any chance of an enjoyable and financially comfortable retirement


Engage a Qualified Property Investment Advisor

As mentioned earlier, you will need to find a qualified property investment advisor (QPIA). Similarly to shares advisors, property advisors track the housing market and understand the process and costs of purchasing investment properties. One of the most important steps to take with an advisor is to clearly explain your goals, expectations, and financial situation. This helps the advisor plan and design an investment plan that is customised to your unique circumstances.

Continue to reevaluate your position with your advisor over the course of your wealth building journey. Ask questions about general cash flow and wealth management and specifically about property. Fostering this sort of trusted relationship will help you get the most out of your advisor’s expertise. As with overall wealth growth, you should consider a commitment with an investment firm as something you will have for many years.

While there are a variety of ways of growing your wealth, one of the best options for you may be to own residential investment property. If you think this might be the right step for you, contact a property investment firm and begin to ask them lots of questions. Keep in mind that the process could take some time, because you have to save enough money or because you want to find an ideal property for your situation. In the end, though, property ownership could prove to be a very valuable step for you in achieving self funding retirement

As always, if you are not sure, please consult a specialist and independent property investment firm before taking any action.

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