Property Investment - A Derivative Of Your Income

A typical successful property investment story usually derives from one of two scenarios.

Scenario One, a mid-aged woman gifted with huge equity from her residential home adopted a sound property investment strategy, took mortgages against her home, bought a handful of properties a couple of years ago and now becomes a millionaire.

Scenario two, a young builder or a close friend of a builder started his property portfolio with purchasing a crappy house on a big block of land, he either renovated it or knock-down and rebuild it, then sold for a big profit and do it again, again and again.

Can you become a successful property investor if you are neither inherited with a big debt-free home nor too old to become a builder. My short answer to you is YES, YOU CAN. But you need to start taking advantage of your income TODAY.

Do you realise that your household income is a derivative to an investment property? Do you know that you can make multiple times of profit to your income if you make the right property investment decision. Never thought this before? I explain this further. a typical lender will lend you up to 4.5 times of your household income, this means if your household income is $100,000, the lender probably will not hesitate to lend you about 450,000. Say in the end, you bought a $500,000 house, and after 2 years, your house value has gone up by 15%. Here is the SECRET, it is your house's value that went up by 15%, that is $500,000x15%=$75,000, which is 75% pay rise of your household income. This is called DERIVATIVE. Your investment property is the underlying asset, and your income is the derivative; a small movement in the property value can cause a large difference in the value of the income.

However, this formula also means that if you made the bad investment, the loss could be multiple times of your household income as well. So how to make smart investment today in property market, I will provide some critical tips in the next couple of articles. If you are a beginner in property investment and have any question, please feel free to email me: smartinvestment@email.com.