Then there is "customisation". Your home is your "own space," something that is very personal, and drastic renovations to this space are not usually a tenant's option. The smart owner renovator should also be able to make these customisations at least return their money on resale, another way of "saving more for retirement" perhaps. Putting in a new kitchen and adding a bathroom tend to pay their way; average returns of 90% of the renovation costs tend to be recouped on the sale price. That's good news if you would really like to be living with a modern kitchen and have an en-suite to your bedroom. You get to enjoy these benefits for the years of your property ownership yet haven't wasted your money in the resale value. If you plan wisely, you can also be taking profits on such renovations. For instance if you choose only minor kitchen upgrades, such cosmetic repairs typically repay over 110% in the resale value. On the financial side it should be remembered that yield averages are there to be beaten. The residential property investment return figures are to some extent skewed by too many amateur investors. The majority just buy a place (their own home) because "it felt right." The punters on the stockmarket tend to be a lot more systematic, buying to set criteria (such as PE ratios and the like). So if you too set yourself step by step criteria, you should beat the odds, and clean up when you finally sell your own home! The Path to taking Profits from your Home Have you ever been envious of someone you know, who lucked the property investment jackpot? Who just because they couldn't afford that nice house in the suburbs back when they were young, now have a tidy retirement package brought to them by the sale of what-was-once considered an inner city 'slum terrace'. Can you, later in life, repeat their success? Well yes you can, but the rule is don't rush (and be systematic). There are pitfalls with property investment, not as many perhaps as with the stockmarket where you can lose all, but it is easy to fail to realise true profits. 1. Caution. Pause to review your lifestyle and investment goals. It is a major life decision to use your home as an investment as you are going to have to live in your home for at least ten years. (Yes, this long period is recommended to see those big profits because of the large costs of real estate transactions.) You shouldn't rush because you really need to get to know your own strengths and limitations. If, when being honest with yourself, you really would like a bit of a hobby farm away from the rat race, then 'investing' in your own home is not for you. If you are not within 10kms of the GPO of a capital city, then you are highly unlikely to get a good return on your residential investment. You won't have that all-important 'position, position, position'. So being financially smart would be to rent that small acreage and save what you would have spent extra, (say on an inner city residential investment mortgage), in something like an indexed mutual fund. You will need financial discipline to keep saving every fortnight though! 2. Research (and use your calculator). You can never do too much reading. Subscribe to something like 'Australian Property Investor' and even a more general investment magazine such as 'Business Review Weekly' (to keep your investment mind open to shares or alternatives). Buy a bunch of property investment books; most of them tend to be a lot less junky than the standard motivational/self-help-get-rich-quick fare. One nice thing about property investment is that it is a sober area that tends to attract the long-term conservative investor. What this suggests is that you probably won't get the chance of getting rich quick like you might investing in the next 'com au' that goes public. But if you do your research, what you buy is very unlikely to be a 'rip off'. A trap to avoid is being afraid to 'do the numbers' yourself. Whilst it is useful to read published advice on what will be the next hot suburb, remember you are trying to beat the averages. You and your calculator will have to figure out what area has the right long term growth potential, before the rest of the market does the same sums. However, one clear advantage you will have over the professional property investor is time. You are buying a home you will live in for a long time, and so long as your area has strong fundamentals, as the owner/occupier/investor you will reap a profits growth period sometime within the decade. You won't have to worry about the peaks and the troughs. The professional does not have this timing luxury. He/she will suffer a profits hit if they buy too early or too late in the boom cycle. 3. POSITION. Hey, we have to return to this one as it is so important! Your investment research will bear this out, but where you buy is the key to almost everything. Spot the modern equivalent of what was once a sleepy little convict colonial area called Pitt Street or Toorak.