The Cost of Waiting
You can be an investor who achieves wealth, security and early retirement. Or you can delay starting. Many people come up with a myriad of reasons on why not to invest now. Are those reasons worth the wait - and the cost?
Rocket Property General Manager, Lindy Lear, was a late starter into property investing. She built her portfolio over three years through having a mentor, being focused, and being driven by a goal of retirement security. Lindy can now count herself as among one of under one percent of investors who have five or more properties - and secure retirement. In this month's article, Lindy explains why waiting was not an option.
The cost of waiting
Statistics tell us we are living longer. It also tells us that most of us will either run out of funds in retirement and/or face the prospect of retiring depending on the pension. Statistics also tell us only 1 in 100 Australians over the age of 65 are wealthy and only 3 in 100 are financially independent - not a very good outcome for working hard for 40 years. The ultimate cost of waiting could simply be ending up with nothing and relying on the pension. Yet here we are, where there are so many interested investors who fail to take the plunge into the market or end up with only a singular investment property.
Compounding growth is the reward
The secret to investing can be summed up in a few words - the power of compounding growth and time. The earlier you start the sooner you finish and the bigger your nest egg. Think of the snowball rolling down the hill, small at first then gaining momentum and growing bigger and bigger closer to the end.
Putting it simply as many others have on the internet. If you Google 'compound interest, investing $100,000 at age 25 with compounding interest of 10%', you'll see that it will be worth $5.5M by the retirement of 65 and that's without investing any more funds. Even at a compound interest of 5%, the nest egg would be $2.25M. Time and compound growth did all the work for you.
In the property world, the power of compounding can have greater impact. I learned this from real life experience. My Dad bought a property in 1970 for $60K and by 2007 it was valued at $1.25M. The property market showed an average growth of approximately 10% over the 5 property doubling cycles. Who would have believed that back in 1970 that properties would grow by that much in 35 years? Certainly not my Dad when he bought it! The power of property is that you can leverage into investing using other people's money (i.e the banks) and have others pay for the investment (i.e the tenant and the taxman). Compounding growth and time work their magic to get results for you.
What is the risk?
Cautious investors seem to weigh the risks more than the rewards. They worry about everything from interest rates going up, to having bad tenants, to maintenance issues, to property prices falling, to the results of the elections – all the what-ifs that cloud their mind making it impossible to move forward. The “right” property will remain elusive to them whilst they are in the negative state of mind. There are always risks to investing, but these can be mitigated by having a sound financial and investing strategy, a sound plan, guidance from someone more experienced and being driven to towards the rewards investing can bring.
To be a successful investor and to reap the rewards of compounding growth in the future you have to start buying property and accumulating your asset base now. Get started sooner and be the investor who achieves wealth, security and passive income. Let time do the work for you. The cost of waiting for me was too awful to think about.
If only I knew what I know now at an earlier age, I would now be in early retirement!