You have decided your budget and now you’re looking to buy a rental property, your keen to get on the property investment ladder and the idea of being a landlord has you tingling all over. If this is you and you’re sure you are not having a stroke, then carry on reading for a few pointers on how to get the best price for your prospective property. We will use Residential Investment Property for the purpose of this article

1) Take an investment approach:
Chances are, you won’t go out and buy the first property you see. As this purchase is for an investment purpose you can remove yourself from the emotional ties that usually go with buying a home for you to live in. You can look at from a purely investment point of view and decide what will be good and what won’t. Yes a nice big garden with lots of lawn would be great for you, but will tenants see it that way, or as just a big chore to do each weekend? You may have always wanted to live in a turn of the century villa, but will it have the same appeal to tenants? By looking at each prospect as a potential tenant and not an owner, it will help you remove some of the extra luxuries that you don’t need to pay for.

2) Make sure the returns are realistic:
The first thing you need to be comfortable with is the amount of rent you will be getting from your investment. As you view properties in different areas and for different price ranges, you will get a feel for how much rent the property would command. Rental agencies will be able to give you rental appraisals (generally for free). If you encounter a property that has unusually high rent returns for its asking price, there will usually be a reason for this. A good rule of thumb is to get a couple of appraisals from different agencies and then take the average from what they tell you. If you want to be ultra conservative then you can take 10% off that average amount and then use that figure as your rent return for budgeting purposes. Its not uncommon for rental agencies to increase the rental amount they would expect to get, in order to win your business. They then lower your expectation, as tenants prove hard to locate.

3) Make sure the property is in acceptable condition:
You have found a great little house that would appear to be getting suitable returns in rent and would appear to be offered at the right price. Excellent! The next thing to do is to get the house thoroughly checked out. Building, electrical and plumbing inspections check all the building and local body permits are in place and get a solicitor to look over the title of the land to check everything is all tiptop. It will cost for these things, unless you have some great family or friends who owe you a favour, but it is a small price to pay for piece of mind. Without them you run the risk of things like, and electrical rewire being needed, replace the roof or the piles of the house or maybe there has been a slow water leak for the last 10 years that has rendered half the flooring unsafe. All these things can cost thousands to fix and all could have been prevented with a bit of due diligence before you purchased the home. If you get the necessary checks and something is found to be wrong, then this can be used to negotiate a lower price or you can simply walk away from the deal.

4) Haggle:
Many people do not like the idea of haggling or bartering to get a good deal. Some are happy to pay the asking price and walk away. The thing to remember with an investment property is, the less you pay, the better the return on your investment, and the less interest you have to pay the bank (if you take out a loan). In real estate, people expect to receive offers that are lower than the asking price, they expect to negotiate with the prospective purchaser and in many cases they put an inflated asking price for the property because they expect to be knocked down. You have nothing to lose except a few thousand from your home loan. If you have a maximum price that you are willing to pay, then do not go above this. There will be other deals out there, if this one does not suit, then simply move on to the next one.

5) Immerse yourself in the scene:
Information and knowledge is a powerful tool in this game. Read books, newspapers, investor magazines, websites, chat rooms, anything you can that is going to give you tips and advice. Talk to people, ask friends and workmates who you know are involved. From my personal experience, property investors are only too happy to talk to others about their experiences. Most areas have groups or clubs for investors to meet and talk, source these and give it a go. There is no such thing as too much information. It is also a great way to meet others who can help you with certain aspects of the investment game.

Responsible property investment means having a good Properties Team.It is one of the most important Property Investment Tips.

John Donne once said “No man is an island”.

When talking about Property Investment, this expression could not be more fitting. Whilst it may be possible to build a property empire all on your own, it is a lot easier to build upon the knowledge and skills of others where possible. By employing the help of an expert, the amount of time that you can save as well as the amount of money you may save in the future should make the decision a “no-brainer”.

Who are these mystery experts that no Property Investor can do without? I’m talking about Solicitors, Accountants, Real Estate Agents and of course the support of Family and Friends. They can all be very valuable for Property Investment Tips and advice.

1) A Solicitor
Now a Solicitor may sound like a dirty word to some of you, but I guarantee that a good solicitor is worth his or her weight in gold. However, they will need to be specialized in the property field. A commercial litigator will not be a lot of help to you in this respect but a good property lawyer will be. They can examine all the legal aspects of any prospect you have, they can set up trusts, partnerships and companies for you to structure all your dealings and they can advise you on any legal obligations you may be accountable for, now or in the future. Solicitors are very easy to find and most should advertise their credentials. Shop around and ask people in the know who they may recommend for your properties team.

2) An Accountant
An accountant will be able to advise you on the best ways to set your respective empire up from a tax and benefit perspective. They will prepare your financial accounts at the end of the financial year and the really good ones will be able to set out your finances in a way where you may be able to save yourself a bit of tax. You may have to liaise with both your accountant and solicitor to set out your portfolio in the best way possible. Like a solicitor, accountants are very easy to source. Try to find one that specialises in property. Most accountants will offer a free consultation before they commence working with you. Talk to them and get a feel for how they operate, if you don’t feel comfortable, then try someone else. Remember they are there to work for you, not the other way around.

3) A Real Estate Agent
Real Estate agents are the men and women on the ground in your properties team. Until you are in a position to know your market 100%, these are the people to talk to. From sales volumes to what prices are doing and where the place to buy is, a real estate agent should be able to give sound advise. Once you have been in this game for a while you will develop your own feel for things and may not need to rely on an external agent as much. It’s always good to have the contacts in place to have a catch up every once in a while, just to double-check your own thoughts. In real estate circles, big would appear to be better, with the most popular sales agents generally being popular because they sell more property and have a good idea on what the market is doing. Try to stick with these people, they will not be hard to locate.

4) Your Family & Friends
Whilst these particular people may not offer any particular specialist skills, they will be able to offer help, support and ideas to assist you with your decision-making. Having the support of family can do wonders for stress levels and having good friends you can call upon from time to time to help out with the odd job (as long as it is reciprocated) can save time and costs. Friends may have undertaken a similar endeavour as yourself, of which they may be happy to steer you in the right direction. Remember a problem shared is a problem halved.

Whilst there will be many others who will no doubt provide you with information and guidance along your path to investment nirvana, I believe that the 4 groups listed above are probably the most important components of your Properties Team.

Everyone has at some stage of their lives heard the saying “You can’t go wrong with property”. Some would have taken property investment tips like this and invested everything they had the very next day. Most of us probably smiled and thought nothing more of it. Here is a list of some property investment tips as to why property investment is the way to go.

1) To Build Wealth:

Property is seen as a proven way to build wealth. Millionaires have been made exclusively through property, and most successful investors will have a significant chunk of their portfolio in property. As long as a long-term view is used, even the most conservative investor can reap the rewards. There is a common saying out there that house prices double every 7/9/10 years (depending on what publication you read). Whilst this has been proven over certain time frames, it is important to remember that there have also been periods of time where prices have stagnated or even reduced. Over a long enough period of time prices will generally increase, hence the need for a long-term view when investing with property.

2) It’s Easy To Manage Yourself:

Whether it’s a Residential Investment Property, a Commercial Property or even a Shareholding in a large Syndicated Investment, it is something that everyone can get to grips with. Sure you will more than likely need an accountant to sort out your tax obligations and a solicitor to set your investment up in the best way possible, but that goes without saying. Once you get your head around the terms associated with your investment you won’t look back. There are a number of clubs, associations and forums for people in exactly the same boat as you where you can get property investment tips, and where information can be exchanged freely.

3) There’s Something For Everyone:

Whether you’re someone that likes to see exactly what you own and have total control or someone who likes the idea but can’t really be bothered with all the details, there is something for you in property. You can purchase a small rental and manage it in your spare time; you can purchase several properties and manage them as a full time occupation. You can even just hand the control over to a third party, let them take care of all the day-to-day requirements and you can watch your investment appreciate over the years. There is something to suit all personality types.

4) Tax Benefits:

Depending on what type of investment property you purchase and the structure in how you set it up, you may be eligible for a number of benefits. For example in New Zealand by holding your property in a special company you can negatively gear an investment property and then claim a tax rebate from the losses achieved in your company thorough your personal tax. You are able to claim back costs that you have incurred in the process of managing your rental such as accountants fees, travel costs, phone and office expenses. Whilst the benefits are an added bonus, I don’t know of any investors that got into property purely for the tax benefits that may be achieved. For a comprehensive summary on what you may be entitled to, a chat to your accountant and solicitor is recommended.

5) Retire Early And Enjoy Life:

By investing in property and building a successful portfolio the possibility of retiring early and enjoying your twilight years could become a reality. A smart and prudent investor could build a sizable portfolio from minimal investment. Having someone else paying off your mortgage or loan lets you:

a) Build wealth faster than you would have originally thought

b) Achieve financial goals and milestones a lot sooner

Once you have achieved your goals, you then have the option to reassess those goals and maybe continue to let it grow or else sell up and live out your days in comfort. You may be in a position to give your children a “kick start” on the property ladder and allow them to build a portfolio of their own.

There are many reasons to get yourself on the property ladder, be it for financial reasons or for the challenge of doing something you haven’t done before. There is a range of different property options with enough variety to suit most people.

You’ve made up your mind; the next step in your path to wealth is to purchase rental property. The research is done and you are ready to become a landlord. Fantastic! The question is: which residential rental properties do you buy?

In the rental investment world, and for this example we will look at residential investments, there are a number of options. Do you buy a new home, an older home, an apartment, a townhouse or a unit in a multi-unit dwelling? All have very different characteristics, market appeal and pricing levels. I will examine each one individually to break down the pros and cons of each.

1) A Newer Home
Who wouldn’t want to own a new home? And it is not uncommon in today’s market for people to purchase a new house with the sole intention of renting it out. The biggest benefit of this is that it will be free from the hassle of repairs and maintenance for the first 5-10 years or so (you would hope). Because it is a new home you can ask for a premium on the rent, which in turn one would expect a higher quality tenant (employed, settled etc). The downside to this is of course the cost! A new home does not come cheap so this would instantly put a lot of potential investors off.

2) An Older Home
Why buy new when you could purchase rental property that is older, that is just as good, for only two thirds of the price? As mentioned above, a new home should be free from any form of maintenance and repairs for a few years at least; the same cannot be said for an older home. Ongoing costs can sometimes be substantial and can put a downer on your newfound investment passion. However, with a little bit of due diligence before you buy (builders, engineers, electrical report) can save you a lot of work later on down the track. Generally speaking, the returns on an older house are actually higher than on a new house (when compared purely on the purchase price). You may pay 30% more for a newer home compared to an older house, but this does necessarily mean that the rent returns will be 30% higher on the new home.

3) An Apartment
In some locations the apartment market is very lucrative, in others the appeal of apartments do not hold the same strength. Apartments work best in major metropolitan areas, where the hassle of commuting and parking are just too tedious to bear. In smaller urban areas, where travelling to the central city and finding parking does not cause you to pull your hair out, then the appeal of inner city apartments lose some of their shine. On the positive side, apartments are generally cheaper to purchase than housing in the same area but can command relatively high rents, meaning the return on your investment is greater. Issues such as Body Corporate Fees can occasionally hit the headlines with enormous fee hikes on a year-to-year basis. Another issue with apartments, and I will be honest and say this is a personal issue, is you have little to hang your hat on in terms of tangible security. You own a box in a building made up of many boxes. With a house, you have a building and the land it sits on (generally), you have something you can see and feel. An apartment you own a very small chunk of that security and have little control over what happens with the other units. I guess that is what I don’t like about it, the lack of control you have over your investment. However, in saying that, many people swear by them and make a very successful living from investing in apartments.

 4) A Townhouse
For those that are unsure of what I am talking about here, I am referring to blocks of houses on a single section. They are very popular at the moment as some older sections with older homes are big enough to fit between 3-6 townhouses on them. Developers will buy the section and clear the old house off it and build as many single standing homes, as the local body council will allow. These are generally side-by-side homes with either a double garage on the ground floor and most of the living space up above or single level homes with minimal space between homes. Tenants share a common driveway and usually have a small partitioned area out back for their own personal use. These are similar to apartments in some cases as a Body Corporate can be responsible for the local area maintenance. They can command reasonable rents and prices will vary depending on the quality of the construction, some can incorporate some very high quality fittings and chattels. The drawback of them is you are very limited to what you can do with them and have neighbours so close that it will only take one or two “undesirables” to bring the neighbourhood down. Townhouses are normally situated close to central city or close to common amenities such as universities to appeal to wider groups. They can have the appeal of an apartment with the flexibility of a house (to a degree).

5) Multi-Unit Dwellings
Multi-Unit dwellings are similar to apartments but on a smaller scale. They can range anywhere from 5 to 20 units in a single complex. Typically they are 1-2 bedrooms and (in New Zealand) are constructed out of the old concrete cinder blocks that used to be so common. In New Zealand many of these are former State Housing Flats. These units can be sold as a whole complex or individually. These have the same drawbacks to apartments but are generally much cheaper. Rents are usually toward the lower end of the spectrum, depending on the quality of the complex. Whilst they appeal to a large market (low income), the quality of tenant is usually questionable and repairs, maintenance and general upkeep may be higher than normal. The return on investment of these types of investments can be very good and some people are able to buy several (or all) units and transform them into respectable accommodation options.

This is just a small array options you have for residential rental properites you have. Each has benefits and drawbacks that may or may not suit you.

So you’re looking to purchase your first investment property? And why wouldn’t you, it is a tried and tested way to build wealth as well as a relatively easy investment option that you can manage yourself. Naturally there is a range of things to consider and decide before you should delve into your first investment property. The purpose of this article is to examine one of most critical areas to determine first: the budget!

I will be using the purchase of a Residential Investment Property as the example in this case

Before you can start looking at possible rental properties to purchase you need to consider just how much you are prepared to spend. How much you spend will depend on your situation in life. Some may be able to pay cash up front, whilst others may have borrowed as much as they can from the bank to finance the venture.

Firstly, you’ll have a very strong indication of your budget by the amount of money you have in the bank. As mentioned above you’ll either have the money up front or need to gain financing. If you need financing then you’ll still need a deposit first. How much you can borrow against that deposit will depend on a variety of factors, but generally for a house it is 70-80%, and sometimes even 90-95% of the house’s value.

However, deciding how much you can afford to spend is not just about how much the property costs or the weekly cost of the mortgage. There are other factors and costs to consider too.

Costs that will be associated with the purchase of a rental will be such things as:

  • Interest and loan repayments if borrowing of funds has been used
  • Property rates (environment, council, water, etc)
  • Insurance
  • Any associated maintenance costs

Now the rent you will receive from your property will go some way to paying for all these costs and in some cases may provide a surplus! If you have had to borrow from the bank to fund this purchase, chances are you may need to “top up” your rental from your own funds to cover the full amount of the associated costs.

For Example: You purchase a $300,000 rental property. You borrow $240,000 from the Bank (80%); Interest repayments on that amount would be $16,800 per year (assuming 7% interest). Rates are $2000 per year and Insurance $500 per year. If we broke this down to a weekly figure it would be $371 per week. Depending on what sort of rent your property will command will determine how much it may cost you on a weekly basis. Bear in mind that the above figure has not allowed anything for repairs and maintenance to the property should anything go wrong. This is something you will need to budget for as well.

By working out what you could comfortable take from your own income each week; you can determine how much you would be able to borrow and spend on an investment property.

When it comes to the day-to-day management of your rental property there are a few options open to you. You can take on the responsibility yourself or you can outsource it to a Property Management Company. There are pro’s and con’s for each and depending on your situation, one option may suit you better.

a) Managing the Property Yourself

Managing a rental property involves sourcing tenants and conducting the relevant background checks, doing a pre-inspection of the property before tenants move in to note any damage/faults that are already in place. Once tenants move in you have the responsibility of checking that rent is paid on a regular basis and conducting scheduled inspections to ensure that the tenants are looking after the property sufficiently (some insurance companies state that this must be done at set intervals for their cover to be effective). You will also be the first point of call should anything go wrong with the house, i.e. if a water cylinder bursts in the night! All this can be very easy provided you have good tenants, but should you encounter difficulties then the stress involved can put a lot of people off having rentals in the future. As a result many people choose to outsource the above tasks to a third party.

b) Property Management Company

If you want the benefits of having a rental investment, but are not the type of person that handles confrontation well, then going with a Property Management Company may be for you. These companies take care of everything outlined above from finding tenants, to doing inspections and collecting rent. They can also take care of any maintenance that needs doing without bothering you at all hours of the night. All these services cost money though. Standard rates vary from between 7.5%- 8.5% of rent collected each week. They generally take the first weeks rent from your tenant as a finder’s fee, whether they charge this to you as the owner or to the new tenant depends on the company. 7.5% is a reasonable amount on a weekly basis and as such will eat into the budget you would have prepared as detailed in Point 1) above.

c) Other Options

In some countries, it is possible to rent you home to a State housing Agency who will then guarantee you rent for a set period of time. Ten-year leases are not uncommon. They source the tenant and cover basic maintenance costs; you do not need to have any involvement what so ever. The drawback to this is of course the standard of tenant in your property will be outside of your control. This may have an impact on the value of your home and area going forward. The guarantee of income for a set period of time is a big incentive. Most organisations like this have strict location and housing conditions so it is best to talk to your local organisation before purchasing a home if this is an avenue you wish to pursue.

Whilst there are many other factors to consider when purchasing your first investment property, the points mentioned here give you a place to start. We will endeavor to provide more information for first time investors into the future. If you have any specific questions, drop us a line and we will be more than happy to source an answer for you.

Property investors make money from investment property in an an extremely varied array of ways. Here is a broad outline of the main types of property investment.

Residential Rental Property Investment

a) Owner Occupancy:

This is the most common type of property investment, possibly the most common type of investment period. Owner Occupancy is where the owner lives in the house he or she owns. It is common for a house buyer to borrow 70 – 90% of the house’s value and take out a mortgage for 20 to 30 years. Returns come in the form of capital gains over the period of ownership.

Some residential property investors disregard this as an effective form of property investment compared to rental property because it does not have same the tax benefits that can make rental property investment so appealing.

b) Rental Property Investment:

Rental property investment involves renting out a dwelling for people to live. This could be by renting out a house, condominium, apartment, or flat. After owner-occupancy this is the most common type of property investment because, in the case of a house, investors you can usually borrow 70% – 90% of the house’s value. This makes it perfect for investors to borrow against there own home to buy it. During the property boom of a couple of years ago it was possible to even borrow 100%. Investors can usually borrow more for a house than they can for other types of dwellings, for example an apartment.

Returns from rental property investment come in the form of rent from tenants and from capital gains.

Commercial Property Investment

Commercial Property Investment is the owning of premises which occupiers rent to make money for themselves. The list of examples is endless, but would include warehouses, retail stores, and office blocks.

While the returns are potentially higher for commercial property, it is generally more expensive as it is often placed in high value areas, such as central business districts. Most importantly, the amount investors can borrow is less, usually 50-70%. It is seen as having greater risks than residential property investment. One reason fr this is because the occupier of the property is more vulnerable to bankruptcy than in a residential property.

As with residential property investment, returns come in the form of capital gains and rent from tenants, in this case businesses.

Property Development

Property development is an incredibly broad form of property investment. Essentially it involves the purchasing of land or a building, and improving its value for resale.

On a smaller scale this could be simply buying a house and making a few improvements or modifications then selling. Small scale investors sometimes prefer this to rental property investment because they do not have to deal with tenants.

It is also common for developers to buy large blocks of land for subdivision. This is more of a medium scale form of property development.

On a larger scale this could be buying an empty plot of land and building anything from a hotel to a golf course. It involves finding a plot of land then having the imagination to see the best way to develop and market a property for maximum returns. The options for this type of development are endless. An example of one famous developer of this scale is Donald Trump.

Large-scale property development is more difficult to enter because it involves more capital and has higher risks. Because the total cost is unpredictable it is also more difficult to borrow for. However, the potential for profit on such a venture is huge.

Property Investment requires selling of houses almost as much as it requires buying of houses. One of the key property investment tips to consider is whether to sell the property by auction. Here are the ten key reasons why property investors need to consider using an auction instead of a negotiated sale to sell their investment property.

1) Transparency

If the residential rental properties are owned by a group of investors, then transparency is a must. The person managing the sale needs to show his fellow investors that the sale was genuine. Too many scandals involving backhanders and under the table dealings have emerged during the recession aftermath to take any risks with your credibility.

An auction is more transparent than an open sale because it is visible, and the formula is simple – the highest bidder wins the sale. This is not that case in an open sale, where the winner may just be the person who entered negotiations first, and this is too vulnerable to a sale happening because the two parties know each other.

2) Potential for Investment Gains

The increased potential for improved property investment gains is obvious. Buyers are competitively out bid each other. They are under more pressure to bid higher than could ever be replicated in a negotiated sale.

3) Completion Rate

One of the biggest issues with a negotiated sale is contract conditions. Buyers and sellers list their conditions in the contract as to what needs to happen or what can’t happen to complete the sale.

Skilled property investors use conditions effectively. However, compared to an auction sale they can just create hassle.

Auctions have a higher completion rate due to not having conditions placed on the sale. At the end of the auction the buyer and seller sign on the dotted line and the sale is complete.

4) ‘Conditional on Finance’

Of the conditions, the ‘conditional of finance’ is the biggest hurdle for investment property sellers. If a buyer enters the negotiations with that in the contract the seller is forced to wait and see whether the buyer gets the finance. If the buyer doesn’t come through with the finance, the seller simply has to start again with a new buyer.

5) Cash Buyers

The presence of cash buyers increase both the likelihood and the ease of a sale. Cash buyers make a sale easier for an obvious reason – they have the money. Even if bidders are not cash buyers they will at least be financed or have preapproval.

6) Marketing Costs

Auctioneers and realtors that specialize in auctions generally have large databases of potential buyers. The database plus the strict timeline an auction offers is perfect for reducing marketing costs. Simply contact the database, put a sign out on the front lawn and conduct open homes for the next three weeks. To increase the buzz around the neighborhood a simple mailbox drop could be considered.

Compare this to the limitless marketing costs that could be involved with negotiated sales through traditional newspaper advertising that could go on indefinitely.

7) Definitive Timeline

An open sale has no clear timeline. It can go on indefinitely. An auction sale, however, has a deadline: the end of the auction. Providing at least one buyer bids the seller has the option to complete the sale.

8 ) Controlled Viewings

The open nature of a negotiated sale’s timeline means the viewing schedule can be very open for buyers and a burden for sellers. Alternatively the contracted timeline of an auction sale reduces the amount of time a seller needs to spend showing people the property. Three weekends’ worth of open homes is often adequate.

9) More likely to end in a sale

An auction is more likely to end in a sale because motivated cash buyers arrive in a competitive bidding environment willing to make a sale.

10) Pre Auction Offers

Even before the auction takes place many property investors receive offers. For the reasons stated above sellers may not want to accept these offers. However, the fact that they have this option as well as the opportunity to take into a competitive bidding scenario really does allow for the best of both worlds.

Property is like any form of investment, where the greater the risk you take the more potential you have to make greater profit. Ultimately how much risk you take my depend on where the money you invest has come from, and to what degree of trouble you would be in if you were to lose it!

What time scale are you working on?

The time scale you are working on will affect the level of risk you may need to take to see a positive return. Where there are many safe investments that will make a nice return over a period of 5 to 10 years, there are very few that are risk free for a period shorter than 12 months. It is my opinion that property investment should be seen as a long term strategy for profit.

Spreading Risk

One way to reduce the risk involved in an investment is to spread that risk across several different projects. If you are lacking in capital, then one way to spread risk would be to invest with a partner, family or friends. Putting all your eggs in one basket is not the best strategy for every beginner. Raising the capital required to invest in property will be a key factor.

Capital

Capital is the money that you have to invest. Capital may come in the form of equity you have in other investments, or the property you live in. The amount of capital you have will turn into the deposit you have to place down on your new investment property after expenses.

Market cycles – How to avoid greater risk

The property market works in cycles, both locally, and as a whole. In times of recession people have less money to spend, more people need to sell their homes, and as a result properties sell for less. If you are a cashed up buyer with capital this is an ideal time to invest in property, and there are plenty of bargains to be found. However, it is also much harder to borrow cash during a time of recession, with banks feeling to pinch of lower interest rates, borrowers are often expected to find a much higher deposit.

The key concept in property investment is leverage. If you have experience in the industry you may already understand this concept, but for the benefit of those who are new, I will explain it. Leverage is your ability to increase your returns by using other peoples’ money to increase the overall value of your investment. With property investment it’s usually the bank’s money.

It makes more sense if you look at some numbers

Say you have $30,000 to invest. This would need to be a lump sum to invest in the first two options, however for option 3 it could be equity from your main residential property which you live in. Lets look at the best way to invest this money?

Option 1) Place your money into a term investment or savings account with your bank

We would be looking at about 3-4% return. After you consider tax on profit, and inflation you are going make very little progress at all. Although, your money will be very safe.

Option 2) Stock Market and Shares

Unlike with the bank, your money would be considered not as safe invested in stocks. However, a lot of that depends on the risk of the stocks you buy.

This table shows how much money you would make if your stock gained 8% annually for 10 years. 8% may be a fairly conservative profit from playing the stock market, however, if you wanted to play safe, I think it is a good index to use.

Year Total Value Annual Profit
1 $30,000.00 $2,400.00
2 $32,400.00 $2,592.00
3 $34,992.00 $2,799.36
4 $37,791.36 $3,023.31
5 $40,814.67 $3,265.17
6 $44,079.84 $3,526.39
7 $47,606.23 $3,808.50
8 $51,414.73 $4,113.18
9 $55,527.91 $4,442.23
10 $59,970.14 $4,797.61

Doubling  your money playing the stock market over 10 years is a good investment, however this projection takes into account an 8% annual gain, and assumes you have invested wisely. There are other variables which haven’t been considered.

The numbers for property investment look even better.

Option 3) Property Investment

The best thing about property investment is it enables you to leverage the $30,000 to purchase a property of $100,000 – $200,000, depending on how much deposit is required.  Your investment will grow as a percentage of the value of the whole property, not just the amount you have invested.

Year Total Value
1 $200,000.00
2 $212,000.00
3 $228,960.00
4 $247,276.80
5 $267,058.94
6 $288,423.66
7 $311,497.55
8 $336,417.36
9 $363,330.74
10 $392,397.20

Looking at a conservation rate of growth for the property market of 6%, the overall value of your property would double in 10 years, however, rather than the investment of $30,000 doubling, the whole investment has doubled. Even if you only had only paid off interest, and no principle, and you still owe the bank $170,000, your $30,000 has turned into $222,397.20 of equity in the property.

So as I am sure you have guessed the $222,000 is much better than the $60,000 from the stock market!