Thursday, October 9, 2008

Property Myth in Personal Finance

Property is one of the most interesting topic in Personal Finance, becaues it carries a lot of myth and paradox with it.

Property is one of the few finance tools 
that bank is willing to lend you money
 before you buy it.

Because of that alone, you can do almost ANYTHING you want with it.  Imagine this ;
1.  you see a good property
2.  you find someone who will rent it
3.  you convince bank how much its worth is and you can repay them back
4.  bank lends you money
5.  you buy the property with bank's money and rent it out
6.  you collect rent and pay it back to bank
So basically you have just own a property for FREE !!  This is just one way.

Unfortunately, because of that imagination as well, many people got into trouble when they put Property into their Personal Finance Plan.

As mention before, Income is different than Finance Planning.  You have to be very clear what you want to do with Property, either it will be your Income or just a portion in your Personal Finance.

Property as an Income 
Just like other incomes you get from your job or business, you will have to work on it.  You work smart and hard for it.  Using property to earn income is very much like running your own business.  Each property you own will become a business that you run to achieve a goal that you set for your business.

Property in Personal Finance
Personal Finance is about portfolio (click here to read more). A finance tool inside this portfolio is one that already has a proven system running.  All you need to care about is to select which system to join and you will get return without doing much about it -  Passive Return or Money earns Money.

So if one were thinking to add property into his personal finance planning, 
and mistakenly treat it as an income source, 
but do not have the persistency to run the business with full focus, 
then most probably he will be very disappointed by the result.  

like wise,

if someone is hoping to gain big money from property, 
but join some property fund instead of buying any, 
then he will most probably be dissapointed by the return rate.