Chapter 3 : The Art of Property Investment

Another tree of wealth that I had mentioned in my path of wealth creation is Property Investment, which is the most popular investment method around the world for all generations of people. Truth to say, property investment is really the best method to create wealth among all wealth creation tools of all time. People from thousand years ago had already participated in this kind of investment through owning wooden houses and rent out to local peasants for rental income. Generally speaking, 80% of the richest people in the world today created their massive wealth through property investment, like billionaire Li Ka Shing and Donald Trump.

Property investment is a really powerful leveraging tools to create wealth, where you only need a small portion of money to finance the ownership of a property. The rest of the money to purchase that property is finance through borrowing from the bank which is the house mortgage loan. The house mortgage loan tenure usually ranges from 10 years to 30 years depending on the age of the purchaser, some banks can loan up to 40 years depending on certain requirements. Maximum age of loan a person can apply is up to 65 years of age, some banks can extend up to 75 years of age. Example of a scenario:

• Shawn is 25 years of age and he wishes to purchase a property for home staying. He saw a property on the market the other day that he has huge interests to buy. The property is price at $100,000 at market value, and he is require to come up with 10% of the cost to purchase that property which is $10,000. The rest 90% of the cash required will be finance through the house mortgage loan which is around $90,000. In this case he can get up to 10x leveraging.
• Because he is only 25 years old, he can apply for a house loan mortgage up to 40 years. This can greatly reduces his monthly installment payments which can help sustain his financial health. So it's very advisable if an individual can buy property at a younger age due to the years advantage.

Property Investment can generate profits through two ways, which are Capital Gain and Passive Income. In some cases if the property owner can hold the property on a longer time frame while he rent out the property over the period to generate rental income to pay off the mortgage, when he sells off the property he will get the maximum profits from both capital gain and passive income. In general, capital gain and passive income have such definition:

• Capital Gain - Profits generated from the price appreciation of the property through buying at lower price and then selling it at a higher price.
• Passive Income - Cash flow generated when rental income collected from the tenanted property can generate surplus money after deduction of monthly mortgage payments and other maintenance fees.

Property which we can invest our money falls into few categories, such as residential property, commercial property, and land ownership.

• Residential Property - These are property which we buy for home staying or renting it out for passive income, the cost to purchase this property is usually lower than other property types. Residential property can further divide to apartments, condos, landed double storey houses, bungalows, lofts and many others.
• Commercial Property - These are property which people buy for business purposes such as office units, shop lots, hotels resorts and many others. In general, commercial property are more expensive than residential property and some require huge capitals for acquiring such assets.
• Land Ownership - Usually the very rich individuals or capital rich companies will tend to purchase lands for longer holding period, in anticipation to sell it off for capital gains or developments of property projects on the land. Land Ownership doesn't generate passive income so it's a very dangerous investments if an individual doesn't have long period holding power.

In the long run, property price tends to go up in trend because of increasing inflation and money devaluation. That says because the government in the world will continue printing fiat currency, our money value will continue to drop and inflation will continue go up. Example, a property purchases at $100,000 ten years ago will worth more than $200,000 in today's value.

Today I conduct my property investment through the Little or No Money deals I learned from property gurus which is a spectacular strategy to acquire properties, which means I don't need huge amount of start up capital to purchase a property. Most deals I did are either non cash upfront payment after price discounts of purchase price or little upfront cash payments after certain price discounts. These deals are huge advantages because it is low risk and you can save certain taxes from the capital gain taxes imposed by governments. That says, these deals are very hard to find and require huge patience on the searching process. It took more than 100 properties searches on the market until I found two properties which fit my buying criteria.

My plan in the near future would be to own at least five properties which can generate passive income and capital gain. Imagine each of my property income have capital gain of $200,000, that would means I have a million worth of net worth asset under my ownership. Plus the passive income generated from the monthly rental income, I can become a millionaire in a short period of time or at least be financial freedom. Now, wouldn't that be a dream worth pursuing?