30 OCT 2013
Last Monday in our investing themed #propchat, participants discussed a range of popular myths and misconceptions about property investment.
We’ve gathered some here. Have you run into these?
Everyone’s an investor these days
There’s definitely been an increase in the amount of Australians investing in property, thanks to a number of factors (tax incentives, our rising wealth, and that pervasive passion for property among them).There’s also been a rise in international investment in Australian property, and countless media stories about investor mania.
But there’s still only a relatively small portion of people that venture into property investment, and fewer still who develop substantial portfolios. People have other priorities, and it does take consistent effort to build wealth through property, which doesn’t appeal to everyone.
Only the rich can afford to invest
Paradoxically, some think only the very wealthy can afford to buy an investment property. While it’s true that you should enter into investment with a financially responsible lens, some are choosing to buy an investment property as their first property, and people on ‘ordinary’ incomes are finding they can take a step into investment by leveraging the equity in their existing home, or with savings they’ve worked hard to put away
All property goes up in value. Sadly, not so. There are even some ‘experts’ who’ll tell you exactly how much it will go up in value, as an inviolable formula.
Due diligence (absolutely critical as an investor) can offer an indication of how values may change, but historical performance isn’t a measure of future performance. If you stack the odds in your favour there’s good reason to believe your investment may pay off, but there are many reasons a property may decrease in value, and these risks should be taken into account.
How to spot a growth area
You have to negatively gear
While many Australians choose negative gearing as part of their property investment strategy, you don’t have to adopt that approach to succeed as an investor and achieve your goals.
Debt is bad
Previous generations had it ingrained in them that debt was toxic by default, but not all debt is bad. Debt can be used wisely to buy appreciating assets.
It’s not worth buying if it’s not close to the CBD
A smart investment considers what’s going to make a property desirable to tenants, and proximity to amenities and transport is important.
Remember, you can improve a property structurally and cosmetically but you can’t change it’s location. But that doesn’t mean an investment further afield won’t pay dividends.
Regional cities and outer suburbs can be a valuable addition to a portfolio, providing the other factors line up
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