According to https://bigthink.com/philip-perry/mathematics-confirms-rich-people-arent-smart-theyre-lucky, 20% of the people own 80% of the wealth. What’s more, luck was the single greatest determinant in wealth acquisition.
Let me paraphrase it. Although you can amass a reasonable amount of wealth through skills and hard work, the majority of people become wealthy through luck. Arguably, some of these people take reasonable risks and get into calculated gambling ventures to allow them to get exposed to and bump into “luck”. You cannot encounter the mythical being called “luck” if you just stay at home all day. You have to go out and venture out, to meet your “luck”.
The majority of businesses disappear after long periods of time. The majority of high-performing stock fund managers disappear after long periods of time. The majority of property moguls disappear after getting overburdened with debts due to having too many properties. Their luck runs out. You cannot be “consistently lucky”. It is important to stop after you have accumulated a considerable amount of luck, because your luck will run out.
Casinos tend to win over the long term, because the gamblers don’t know when to stop after they get lucky. They keep playing.
But luck is important and is a key determinant of building wealth. You need to get exposed to luck.
Here in March 2021, I propose to you, one gambling venture which may allow you to meet Luck. You buy an apartment unit which has been sitting on the market for some time. You can get this information by asking the agent or by monitoring www.realestate.com.au, or by asking your mortgage broker who has access to the RP Data database. It is likely that you can buy that apartment without too much competition (after all, it has been sitting on the market for a few weeks). So, the apartment will be “easy to buy”. This will be quite unlike “buying a freestanding house”, which is a “difficult job” due to the sheer number of competitors also wanting to buy the same house that you set your eyes on.
So, you buy an apartment which nobody wants today, hoping that 5-30 years from now, it will be worth 2x, 3x or even 50x in value.
Properties go through an up and down cycle. Today, everybody wants a freestanding house because they are afraid of coronavirus in apartment buildings, they want to work from home next to the beach 1-2 hours from the city, and need a big space. But 5 years from now, there is a reasonable chance that people will love apartments and city centres again. Over the last 100 years, people slowly gravitated towards the city centres. A 100-year trend is more likely to hold than a 1-year trend of living in regional areas. The attractiveness of online shopping and the beach probably won’t last.
Apartments have become cheaper and cheaper. Houses have become more and more expensive. Soon, a house will cost double an apartment, at a similar floor area. People will then realise that they get a better value buying an apartment, and apartment prices will start to rise again. The gap will narrow down.
Smart people take reasonable gambles, but not reckless gambles. Your gambling venture may be more reasonable if you buy an apartment which you are reasonably content to live in for the next 5 years, and can force yourself to live in for the next 30 years. It doesn’t need to be your dream home. But it should be something you can tolerate for a long period of time.
If you wait 30 years, almost any apartment you buy will have gone up in value. Plus, you will not need to pay rent for the next 30 years. You will have paid off your mortgage completely. So you will own an apartment without a mortgage. If you still don’t like it after living in it for 30 years (which is unlikely, because you will have got used to it), you can sell it and get yourself a lot of cash. You can use this cash to retire and rent in your ideal location for the rest of your life.
Not such a reckless gamble, is it?
Disclaimer:
This is not a financial advice and is not any form of advice. It is an entertainment article, about a potential gambling venture you might want to undertake. No responsibilities are accepted if you lose money.