I’ve embarked on a novel experiment.
After Dad died last November, I inherited his house. It’s in Tennyson, an upmarket suburb of Adelaide wedged between West Lakes and Gulf St Vincent. I’ve decided to keep it and rent it out.
Maybe you’re surprised. After all, I advise my clients to invest in commercial property. Residential investment is totally new to me. I’ll be learning as I go.
My first lesson? Lower my expectations. The real estate agent valued the house at $2 million. Rental return? $50,000 per year. That’s a 2.5% return on capital. Abysmal, by any standards.
So why not sell it? After all, there’s no sentimental attachment for me. The street has changed so much since I was a young lad. Most of the blocks, including Dad’s, have been split in two. I see the house as a financial asset, not my childhood home.
That’s why I’m keeping it. Because I expect its value to increase. I’m not alone. Most Australians see residential property as a prime investment.
Right now, the market’s smashing expectations, up 8.6% in 2025 alone. Houses are a good long-term bet, too. Over the last 25 years, the average house price in Australia has risen 560%.
Home ownership allows business owners to leverage wealth. I’ve written before about paying off your first home, then using its capital value to finance the acquisition of commercial property. But if you really want to maximise your wealth, you need to
think long term.
This story really began 50 years ago, before Dad even built his house. He could have bought a lakefront lot in Tennyson. Instead, he chose a cheaper block, back from the water. At the time, lakefront land commanded a 10 to 20 percent premium.
Fast forward to 2026. While Dad’s house has increased in value, lakefront properties in Tennyson have gone bananas. And seaside houses? Don’t even think about it!
With hindsight, it’s easy to see that Dad should have bought on the water’s edge. I’ve asked him about that in the past. His excuses never convinced me. He could have paid a little extra without overcommitting himself. It just never mattered to him.
But it matters for business owners, precisely because you can take your capital growth to the bank when you want to build wealth.
Back in 2012, I was looking to buy my first house. A dear mate of mine had a place in Grange, worth around $700K. He’d paid it off ten years earlier. I liked the suburb, just south of Tennyson, and close to Dad. I figured I could afford $700K to buy in.
But when I saw a smart brick bungalow one street back from the beach for $950K, my eyes lit up. Here was a place with real potential for capital growth. I knew I had to go up $250K. Yes, it was a stretch, but it paid off big time.
Here’s the kicker. My mate and I have both seen our properties increase in value. But mine’s now more than twice the value of his.
I’m living in the house he could have purchased. In fact, I often urged him to invest in another property. But he and Dad were similar. Once they’d paid off their mortgages, they felt comfortable. They didn’t feel compelled to buy more property.
I’m not sharing this story to brag. It’s just economics. The better the property, the higher the likely appreciation rate.
So whether you’re buying your first home, or upgrading to something larger, ask yourself this: could I buy an even better property if I was prepared to extend myself more? Because if you can, you’re setting yourself up to keep building wealth!