We all know the game of Monopoly.
Perhaps we played in when we were younger.
Personally, I really enjoy the game. It has so many lessons about money, property, cashflow and strategy that I think it should be played in schools all the time.
With the Australian property market, we are seeing almost unprecedented levels of growth in prices.
The pent up demand after a year of uncertainty with Covid, Government stimulus and record low interest rates have seen properties sell for well above listing price and auctions push prices even higher.
This is great for those of people who are ‘in the market’ right now. That is, people who own properties.
For those looking to buy, it is important to not get too carried away.
It is also an important lesson in how to win in the game of Monopoly and therefore in the property market in general.
In Monopoly, you first buy your land, then you add up to 4 Green Houses then 1 Red Hotel.
From there, when people land on your property, they pay you rent based on the number of houses or Hotel on the property.
Over time, you own more properties, get more rent with the idea over time (the duration of the game) you make the other players pay you so much that they become bankrupt.
Now, you don’t want to bankrupt people in real life when you buy a property, but the same principle applies.
Buy the property, hold onto it, perhaps add value to the house, maybe even put on another house on the property to increase the rent.
Over time, the income from the property will go up, the value will go up and you have then created both an asset and an income stream you can rely on.
But the value is in the long term nature of the strategy.
Not the short term speculation.
So the message is, while a booming property market is great, a long term ‘Monopoly style’ strategy will still win in the long term over short term speculation.
That way, you too can win in the game of Monopoly.