Property vs Shares!!! – Two Overlooked Factors

Are you deciding whether to invest in property or the share market?

While at Metropole we are property specialists, we also advocate for diversification, so a healthy investment portfolio should contain an element of both.

Most successful investors have multiple income streams and are shown to hold and benefit from both asset classes.

Therefore, this is not an argument to suggest one will perform better than the other.

This is about my experience growing an asset base and why I think property (residential in particular) has the edge over shares.

Here are my thoughts.

Performance

A1

As the data shows, there is very little difference between both Australian Shares and Residential Property over the longer term.

It is important to remember we are speaking about averages here.

I know that with both assets that there will be experts that can study, analyse and outperform these markets, or in some cases underperform!

But, overall there is very little difference in performance and I would suggest that this will be the same moving forward.

However, when starting your investment journey, in my experience it is property that leads the way.

So what gives property the edge?

1. Leverage

The first factor is being able to leverage more of your own money into growth assets, by using….. someone else’s!

With Residential Property, quite often a standard loan will require a 10% to 20% deposit, in the past, it has been as low as a 5% deposit.

What this means is that with $100,000 of your savings, you could find yourself being able to access funds that would allow you to invest anywhere between $500,000 to $1 million.

You can then purchase a high-growth asset such as property.

Conversely, when investing in shares, you will generally be required to come up with somewhere between a 30% – 50% deposit.

In this case, your $100,000 will only allow you to invest between $200,000 to a maximum of $330,000.

Regardless of the performance of the asset over the next 10 – 20 years, with a significantly wider asset base, combined with leverage and compounding, it is property that will allow you to grow your asset base and wealth faster.

2. Add Value Potential

The next one is fairly obvious but often overlooked.

It is pretty much impossible to add value to your share portfolio, so you are relying on the market to do all of the heavy lifting for you.

Property House Value PeakWith property, it is different though.

You can increase the property’s value and boost cash flow by either renovating or developing.

We have a number of beginning investor clients dip their toe in the water and undertake a small cosmetic renovation to increase their property’s value and close the cash-flow gap.

Our more sophisticated investors take their portfolios to the next level and undertake a development, something that builds their wealth and cash flow considerably faster.

It is probably more crucial than ever in a low growth, low inflation economic environment to be able to have a bit of a trick up your sleeve, rather than being left at the whim of the markets.

To Summarise Time Money

I often enjoy the debate between property and shares and watching many get hot under the collar as they promote their preferences over the other.

When you look into the detail though, there has been very little between the two in overall performance and I would suggest that this will continue moving forward.

In my experience though, there are two factors that give property the edge when starting out, which allow you to build wealth faster.

You can leverage more of your own money into the property than you can with shares.

This means access to funds to invest into a larger-sized asset and when you include compounding and growth, there is a clear edge.

Adding value to the asset also gives property the upper hand, particularly in a low growth environment.

Now is the time to take advantage of the opportunities the current property markets are offering.

Metropole Team

Sure the markets are moving on, but not all properties are going to increase in value. Now, more than ever, correct property selection will be critical.

You can trust the team at Metropole to provide you with direction, guidance, and results.

Whether you’re a beginner or an experienced investor, at times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s exactly what you get from the multi award-winning team at Metropole.

We help our clients grow, protect and pass on their wealth through a range of services including:

  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now! Click here to learn more
  2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $4Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney, and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment-grade property.  Click here to learn how we can help you.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
  4. Property Management – Our stress-free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years, and our properties lease 10 days faster than the market average.
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Brett Warren

About

Brett Warren is Director of Metropole Properties Brisbane and uses his 13 plus years property investment experience to advise clients how to grow, protect and pass on their build their wealth through property. Visit: Metropole Brisbane


'Property vs Shares!!! – Two Overlooked Factors' have 2 comments

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    October 10, 2019 Jack

    What do you cater to beginning investors with little or no knowledge? What would Michael suggest?

    Reply


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