There are some common misconceptions about property investment, so let's debunk the top 5.
Misconception 1: "I must buy in my neighbourhood or city."
This is a common misconception as these investors feel that “knowing” their suburb means it is a good investment.
They know about that suburb, the shopping centres, the schools, the transport, the neighbours, the people and on it goes. Besides putting all your eggs in one basket, these are not a good reason to invest in your area.
Astute investors understand a range of macro and micro factors prior to investing in a specific area and property, including:
Percentages of owner occupier’s vs renters;
Misconception 2: "I need to be wealthy to invest."
Nothing could be further from the truth. Most property investors are mums and dads on an average income just wanting to minimise their taxes and grow their wealth for when they retire down the line with a passive income.
Misconception 3: "Buying old and flipping is better than buying new."
The approach between renovating an old dwelling or purchasing new all comes down to personal preference.
When buying new, you do pay a premium, but one must consider if that premium is worth it over the long term.
Attracting better tenants, being able to significantly lower one’s taxes through depreciation (no longer available on second-hand properties), having long warranties with very little, if any, maintenance.
Older properties allow for the investor to improve that property with some renovations and flip it when ready. Again, most fail. Generally, most capitalise on the renovations, buying and selling costs money and takes time. Repairs and renovations can be very costly, particularly if holding and not flipping.
Misconception 4: "I don't want to incur so much debt."
Naturally, this always depends on each investor’s risk profile. Some cannot deal with any debt, some can. The adage that there is good debt and bad debt is true. Investing in assets that will give you a lifestyle you want in retirement, if affordable, is good debt: That is, the debt should bring you a healthy return on investment over the long term.
Knowing you can afford to hold a property when interest rates rise (which they will) or if vacant for a few weeks (which will happen) and you have bought well, should not be a burden on your lives and prepare you for the lifestyle you chose when earning this sort of income is no longer possible.
Misconception 5: "I don't need the help from an investment specialist."
Investing by yourself without a property investment consultant guiding you can be a very risky game.
There is an abundance of comprehensive diligence that needs to be done on each investor and each property to minimise the risk associated with property investment. Work with experienced researchers that come with, a decent pedigree, a great track record and a deep understanding of all the property markets around Australia.
Looking to get the property investment conversation started?
Or, just looking to stay in the loop?
Warren Jacobs - National Business Development Manager at Meridian Australia
P: (02) 9939 3249
Disclaimer: When considering purchasing a property, it's always prudent to seek the advice of an appropriately qualified professional to determine which strategy is most appropriate for your circumstance.