More Important Than the Property Choice

The simplest asset class classification is shares, fixed interest, property or cash. Those classifications can be further divided into numerous sub-classes, such as houses, units, offices, factories (property), or even houses in America or Queensland or Perth etc.  

What may come as surprise to many investors is that the actual property you pick is not the most important decision! It is much less important than the decision to be exposed to an asset sector. In other words, whether a fund manager selects an industrial investment in, say, Poland or a retail investment in, say, Sydney or a house in Perth is a far more important decision than the individual properties within that asset sector. Why? Because if the demand for industrial space in Poland falls, none of the properties within that asset sector will rise; if the Perth residential market rises they will all rise. 

The Australian Financial Review reported the opinion of the head of Macquarie Investment Management who said "asset allocation, rather than stock selection, is the key to creating sustainable wealth." It is a fundamental, for property, to only invest where you have positive population growth. 

Why, because, according to Dr James Skinner of the Applied Population Research Unit of the University of Queensland, population growth of 50,000 generates a need for approximately -

* 18,000 new dwellings,
* 600 new retail shops
* 450 hospital beds,
* 125 new medical practitioners,
* 25,000 additional cars. 

Have you ever wondered why the minority become wealthy while the majority struggle? It is because the rich understand these principles and invest their money (usually borrowed) into assets that increase in value, whereas, the poor invest their money (usually borrowed) into things that make them feel rich, but which decrease in value (like boats, cars and various trendy products). 

This is the essence of building wealth. Invest in assets in growth areas as soon as you can and don't borrow for products that decrease in value. If you want to become overnight millionaires, then property is not for you. However, if you are prepared to take 10 to 20 years then property is the answer. 

Property works even though it will never be perfect. You will never find the perfect house or the perfect finance but you will find a vehicle that will bring you financial security. Don't get stampeded into panic reactions to short term fluctuations, ignore the exaggerated headlines of the media and hang in there. You will find that long term investment in properly financed residential property is a "loss proof" investment.

Article Source: http://EzineArticles.com/?expert=Neil_Handley

About the writer -----------------------------------------------------------------------------
Neil Handley graduated as a Bachelor of Economics and Accountant. After some 20 years as a stock broker Neil turned to property development. He then acquired a controlling interest in a property development company listed on the stock exchange and became CEO. He has been involved in developing residential subdivisions, industrial subdivisions,shopping centres, office buildings and medium density residential dwellings in Sydney's north shore, Northern Districts, Parramatta and Liverpool areas and on the Gold Coast, Queensland. One office building was sold to the AMP for $25ml. Neil's company advises on building wealth via property.
Go to http://www.specialstrategies.com .

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