HOW ORDINARY PEOPLE BUILD PROPERTY WEALTH

Think property investing is only for people with deep pockets? Jason Lee argues that access to finance, rather than personal wealth, may be the key to getting started and building assets.

“Most people assume that investing is a game reserved for the wealthy; that you need a substantial nest egg before you can grow one. But, you don’t need money to make money in property. You need access to money. And that changes everything.

Real estate is unique among asset classes in one critical way: the bank will lend you the funds to buy it. Try walking into a bank and asking for a loan to buy shares. They’ll show you the door. But present them with a solid property deal and they’ll fund up to a hundred percent of the purchase price, particularly if you are a first-time buyer. That is the power of leverage and it is the single greatest advantage available to the ordinary investor.

Let’s put it simply. You find a property worth R1 million and are able to put down R100 000 of your own money – ten percent. The bank funds the rest. If that property appreciates by ten percent in a year, it’s now worth R1.1 million. Your R100 000 deposit has effectively doubled in value. That’s a hundred percent return on your own capital, while the asset only grew by ten percent. No other investment allows the average person to engineer those kinds of returns on limited funds.

Now here’s where it gets even more compelling. If you are able to procure a hundred percent home loan on the property, that means you can acquire a R1 million asset with nothing out of your own pocket. Apply the same ten percent appreciation scenario and the numbers become extraordinary: your R1 million property grows to R1.1 million, delivering a R100 000 gain on zero capital invested. Mathematically, that is an infinite return on your own money. No stock, no unit trust, no savings account can offer you that starting position.

But leverage is only part of the story. While you’re waiting for that capital growth, a tenant is paying towards your bond and holding costs. Done correctly, your rental income could cover your monthly mortgage repayment and holding costs. This means someone else is building your asset base for you. You are acquiring wealth using other people’s money, repaid by other people’s rent. That is the closest thing to a free lunch that investing has to offer.

For those who feel locked out of the stock market, unit trusts or offshore investments because they simply don’t have the capital reserves, property is your entry point. You don’t need to be rich to start. You need to be informed, patient and willing to do the work upfront.

Where do you begin? Start local. Understand your own market: the suburb, the rental demand, the type of tenant you’re targeting. A modest flat in a high-demand area will always outperform a glamorous property in the wrong location. Numbers must make sense from day one. Calculate your rental yield, factor in your bond repayment, rates, levies and maintenance. If the deal works on paper, it can work in reality.

The investors who build lasting wealth are not the ones who waited; they’re the ones who started, learned, and kept going.

Property has created more millionaires than any other asset class in history. The door is open. You just have to walk through it.”

Jason’s book, Retire Rich Through Property is out now.