How many fully paid off investment properties is your income worth?
What I mean by this is imagine you earn $50,000 a year.
Imagine you worked and saved for years and you have bought and paid off an investment property worth $500,000.
Let’s say this investment property earns a realistic rental return of 5%, so $25,000 a year.
Your income is now $75,000 a year.
Now let’s say instead of buying that investment property you got promoted or got another job paying $75,000.
You are earning the same money without having to buy that investment property.
In actual fact, you are earning an income equivalent to 3 fully paid off investment properties.
This is why it’s important to focus on your income whether through business or your job.
This is why property and shares won’t make you rich (at least not for a long time)
This is a very clear realisation and perspective but it only occurred to me last year and most people don’t get this.
If you earn a salary of $100,000 a year, that’s the equivalent of OWNING 4 INVESTMENT PROPERTIES
2 MILLION DOLLARS WORTH OF PROPERTY EARNING 5%
And you might be asking “what about if I bought investment properties with a 5% deposit and make thousands on a 5% investment!” well as you can see from my article on investment properties, over the long term your returns average out to about the same as a fully paid off property”
(In this example I’m not including the capital gain return either which is just inflation)
So your real return if you bought and fully paid off an investment property (you actually making money) is the rental return.
This example could just as easily work with shares
$100,000 worth of shares getting 5% in the form of dividends? That’s only $5,000
Surely you can take another job or work some extra hours and make an extra $100 a week and make that $5,000 a year now?
Holding your wealth in property or shares isn’t a bad idea, I’m just saying initially if you want to make money focus on your business or job income first because you can build it up instead of trying to invest in properties or shares.
Money isn’t everything but think twice before you leave your job for another paying $10,000 or $20,000 less because your basically giving up a $200,000 or $400,000 asset for it.
I hope I have given you all some new perspective on income and investments.
Feel free to make any comments or ask any questions,