admineconomy including through property ownership. Property ownership is a proven way to accumulate wealth.
Wealth is financially defined as the residual income after deducting all the expenses. As such, wealth is defined as the net worth that is the accumulation of your residual income over a period of time. Therefore, to create constant and lasting wealth, you need to add value to all your financial resources.
Wealth is not equal to richness. Richness is a vague, relative, subjective and ill-defined term, which has no definite meaning except in generalized speeches.
Wealth is also not just equal to income that one earns or generates. A huge income does not guarantee that it will generate wealth. It is very much dependent on the person, consumption habits and strategy. A property’s power and capacity to generate income while holding expenses is a leading wealth building vehicle.
Property as a wealth accumulation vehicle refers to real estate beyond one’s home/house.
When seeking to use property as a wealth accumulation vehicle you need to accumulate more properties in addition to your own home and it’s normally wise not to include your home as part of an investment drive to avoid encumbering it or play Russian roulette with it.
Since time immemorial it has been shown that creating wealth is not the only way to get wealthy.
For most of human history it has not even been the most popular or common. Until a few centuries ago, the main sources of wealth were mines, slaves and serfs, land and cattle.
The only ways to acquire these rapidly were by inheritance, marriage of convenience, conquest or confiscation. Naturally wealth had a bad reputation because of how it was acquired which is even true today with resentment and suspicions that surrounds wealth.
However, some things changed. The first was the advent of the rule of law. For most of the mankind history, if you did somehow accumulate a fortune, the ruler or his henchmen would find a way to steal it. But in medieval Europe something new happened. A new class of enterprising merchants and industrialists began to collect in towns. Together they were able to resist local feudal lord who attempted to loot their wealth.
Secondly, progressive societies do no let a ruling class of warriors and politicians squash the entrepreneurs. It had been observed that if you take away the incentive of wealth, and technical innovation grinds to a halt.
The same recipe that makes individuals rich makes countries powerful by having wealthy citizens.
Internally most companies are run like communist states without any clear incentives for high performers, which results in bigger companies trailing small start ups. This makes start ups another clear way to create wealth.
The financial journey through life’s time line starts at different levels, depending on whether you were born with a plastic or a silver spoon in your mouth or had a poor dad or rich dad. As you travel through your life, your investment options change and vary. Knowing where you are and what options are available will help you make the right choices.
According to research the best proven best financial plan is to create the maximum wealth during this aggressive investment period of your life. Design and build financial security yourself, do not subcontract such an important area of your life.
Don’t rely on others to do it for you. Many people who relied on major banks and insurance companies for financial security ended up short when these institutions failed or when the cost of living increased or currency was scrapped as the case with the Zimbabwe dollar that was de-monetised and replaced with multiple currencies.
Those who had relied on pension funds, insurance policies, etc, were left destitute compared to those who had bought several properties.
It does not matter where the property is, even high-density area properties can give you a decent lifestyle in retirement with a steady stream of rental income.
When a property is rented for income and there is more income coming in each month than expenses going out. A properly selected single investment property typically offers several different avenues to build wealth.
When property values rise, the difference between what you owe (cost) and what it’s worth increases thereby adding to your wealth.
Owning investment properties helps offset income from other revenue streams that you have.
Self-liquidating and principle reduction. Borrow a loan to buy investment property, every month your loan balance decreases slightly.
For example, if you buy a home with a 15-year mortgage, after 15 years the loan would be paid off (partly by the tenants’ monthly rent payments) and you’ll own the property with additional wealth created this way.
Investment properties can utilise any of the above four avenues, but an ideal investment property will have all four qualities. In the wealth accumulation process it is compress your whole working life into a few years. Instead of working at a low intensity for 40 years, you work as hard as you possibly can for four. There is a conservation law at work here if you want to make a million dollars, you have to endure a million dollars’ worth of pain.
For example, one way to make a million dollars would be to work for the Post Office your whole life, and save every penny of your salary. Imagine the stress of working a boring job for 40 or 50 years. In a start-up you compress all this stress into three or four years. Wealth has been created and destroyed (but on balance, created) for all of human history.
In the modern world, you sink or swim, and there are no excuses. When those far removed from the creation of wealth – undergraduates, reporters, politicians – hear that the richest 5 percent of the people have half the total wealth, they tend to think injustice!
An experienced analyst, however, will realise that someone has sacrificed social, family life and many others to succeed as an entrepreneur with a start up venture. There is a large random factor in the success of any company there is no exact science for a start up to succeed.
So the guys you end up reading about in the papers are the ones who are very smart, totally dedicated, and win the lottery in terms of hitting the big time and building a successful business.
Contact: 4 Dan Judson Road, Milton Park, Harare. Facebook: http://www.facebook.com/GMRICAPITAL; Twitter: @capital_gmri
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