When people are considering investing, there are three main areas to choose from; shares, property or cash deposited in interest bearing accounts.

Why has property proved to be the most effective choice?

In most western countries, over the past 50 years property has averaged 10% p.a. compound growth. (Carefully selected properties have averaged even greater returns). Not forgetting that investment properties also generate an income from rent.

For example Median priced property in Australia has averaged growing at 2 4% p.a. higher than inflation, making it a very solid investment.

One of the most effective ways to build riches is to accumulate a portfolio of investment properties (over the space of 7 to10 years) and then let the power of Compound Interest work to your benefit.

The main reason that property can be utilised more effectively than shares as an investment, is due to the added benefit of being able to highly leverage an investment property.

Leveraging is where you use a small portion of your own money along with a large portion of someone else's money (a bank loan) to secure an investment of a far greater value than you could have, using only you own money.

If you invested $10,000 directly into shares that were growing at 10%, then in 7.2 years they would be worth around $20,000. On the other hand if you had used that $10,000.00 as 5% deposit on a $200,000.00 property and borrowed the remaining 95% plus establishment costs. If this also grew at 10% then in 7.2 years your investment would be worth $400,000.00. Meaning that by leveraging your investment you have gained an additional $190,000.00.
Compounding has an even greater power, the longer it is allowed to work. With the above example, if you were looking at a 21.6 year period, then the results are quite staggering.

The unleveraged shares would be worth $80,000 and the property $1,600,000, a differential of $1,520,000.

It is possible to borrow 100% of the purchase price of a property plus expenses by securing the deposit against your own home, so that you don't need a cash deposit.

If you purchase a $250,000 investment property and hold it for 21.6 years, at 10% growth it will have grown to $2,000,000 (increase of $1,750,000) so you will have averaged $83,333.33 per annum profit!

Well researched properties can give even greater returns.

This example has not taken into account the effect of inflation, however it is easy to see that hardly any other investment

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