A fine line between wealth creation and greed

Fleur Allen

Over the past few days I have taken some time off to spend time with family and as a result of slowing down have also had the opportunity to read, observe and watch some interesting documentaries, articles etc.

As a result, I have observed that sometimes it is a fine line between wealth creation and greed. What I mean by this is when things are good in regards to investment opportunities such as property, stocks or the like we are all essentially human and even the best of us can get caught up in wanting more and more and more and losing sight that over the long term all these investment vehicles run in cycles both up and down. Long term investment is about riding out the cycles, taking the good with the bad but overall ending up with a natural gain.

It was shocking to note that comments made throughout a documentary leading up to the global financial crisis in 2008 which saw the demise of bank Lehmanns and the bailout of bank Bear and insurance company AIG by the US government that the property boom in the US was not expected to end but continue to rise and rise. When in history has property values only increased without some downturns? This lead to unregulated mortgages and 2nd mortgages and a very sophisticated and again unregulated trading vehicle which saw average mortgages 'bundled' and sold off to investors which now has resulted in abandoned houses across the US which is now affecting the average home owner and the community they live in or rather lack of. And why did this occur? Because people could? Focusing only on the short-term financial gain and not the long term financial and social ramifications.

Image Source: The Age

Can you imagine building or even buying an established home and then dozens of houses in your area left vacant? What implications does this have to the community you wish to create for yourself and your family? Does this sit well with you as a property investor? Do you think your investment property is going to be appealing to potential rental clients if there is no community developed?

Now 4 years later have we changed?

I am enjoying holidaying with friends that live in a popular holiday destination. They have just finished building their beautiful custom designed home which suits their lifestyle perfectly. However they bought their block only a few years ago in a development area that is zoned semi-rural and did not allow short-term accommodation which meant they could rely on their neighbours being locals and therefore a sense of community for their growing family. However just recently an adjustment to this type zoning to allow short term accommodation has been put through and on their street  is now a house rented out as short-term accommodation. Therefore a transient, temporary neighbour. Is this really necessary? In this location there are plenty of properties and areas that allow short-term accommodation zoning is this a sign of greed?

I encourage responsible property investment. Not only to be suitable for the investor but to know your rental client and the community you are buying into. It needs to be a good match for it to be financially viable for the investor in the long term. Therefore look after your rental client and you are looking after your long term investment.