There's so much information about how to invest in property, but not all of it is valid. To help you avoid following bad advice, we debunk four commonly believed property investment myths.
When you’re looking to invest in property, you’ve got to wade through lots of advice and information to find out how to get the best results. This can be confusing, especially as there are many myths out there when it comes to property investment.
Here are four of the most commonly believed myths debunked:
1. You Need Lots Of Money To Become An Investor
This myth is becoming less common than it used to be, but you’re still likely to hear or think it. Believing this fallacy can stop you from entering the property investment market, or you might be tempted to wait until you have more money. Hesitating however can end up costing you.
You can become a property investor even if you’re not a millionaire. Speaking of millions, there are over 1 million property investors in Australia. According to ING Direct’s 2016 Financial Wellbeing Index, one in five Aussies own an investment property, with the biggest percentage being in the 18-34 year old age range. Many property investors are people earning average wages.
Of course, investing in property does require a certain amount of capital or wealth and involve financial risk, but that doesn’t mean it isn’t feasible for many people. If you’re concerned about finances, meet with a financial advisor to work out how much you can afford to invest. You can also invest conservatively so that you’re minimising risk.
2. Only Buy New Properties
It’s tempting to buy a property off the plan or one that has just been built. It’s likely to look its best, been freshly painted and have brand new appliances and fixings. There’s no wear and tear, and it will be up-to-date in terms of its design and aesthetic.
That said, there are many reasons to invest in an older property. Firstly, an existing property has the advantage over an off the plan property in the works, in that you’re able to see what it actually looks like, not just how it’s predicted to turn out. New properties also often come with a premium.
Older properties may have been better built with higher quality materials. They can have a lived-in charm that you can’t replicate in a new model. They might better match the other houses in the street which have a similar design. If you do buy an older property your property manager will be able to best advise you on any renovations should you feel the need to spruce up the property and update it for the market.
3. Stick With Suburbs You Know
Sticking with what you know can make sense, but it also limits your opportunities. Yes, investing in an area you’re familiar with (such as the suburb you currently live or work in, or grew up in, or have family members residing in), you’ll be at an advantage in knowing what facilities and transport are available nearby, what the local schools are like, which neighbourhoods are good and which should be avoided. You’ll have a good idea what it is buyers and renters in this area will be looking out for.
Don’t forget that while all of the lifestyle aspects of a property’s location should be considered, they’re not the be all and end all when it comes to investing. Is the location a growth area? What are its the demographics? How many properties are on the market?
However, all of these factors can be learned through basic research. Talk to real estate agents and specialist property managers in the area you’re thinking of buying your investment property in and they’ll be able to run you through all of these things.
Many investors start off thinking they can do it all alone - find the property, advertise for tenants, manage repairs and maintenance. How hard can it be, right? But this approach may not be the wisest one for long term growth.