In our day to day lives, we hear a lot of chat around people’s perceptions and what it is to invest in property. It’s an exciting industry that offers a lot of potential to a lot of different demographics. The problem is, that with such a buzz comes a lot of hot air.
Of course, some of the information you will have heard around investing in property will be true, but at the same time much of it will be false. The key is knowing what you should believe and, more importantly, what you shouldn’t. To people who don’t have a professional background in property, this can seem like an impenetrable minefield.
Unfortunately, this type of mentality scares off many people from getting involved in the property market in the first place, and the misinformation surrounding it leads others to making crucial mistakes that cost them time and money.
In this article, we’re here to clear up some of the facts surrounding the investment market, and we’re going to start by busting some of the most common myths and misconceptions we often hear around investing in property.
1: Property Investment Is Only for the Rich
Let’s start with one of the biggest myths that tends to put off most potential property investors. People often think that you have to have bags of disposable income before you can even begin to think about investing in property. This is complete nonsense, and the truth is that getting started in the property market is a lot more feasible than you would have thought.
If you structure your investment property in the right way, then there’s absolutely no reason it has to affect your lifestyle. It doesn’t even have to take up all your savings. In fact, if you have equity in your home, then it can be utilised in a safe way to help fund your investment property.
The key is to sit down with an investment-savvy advisor, and have them tell you exactly what you can and can’t afford. With our clients, we break this down into how much a certain property will cost in weekly payments, always making sure that the investment is feasible and within the client’s means.
2: All Property Will Go up in Value
This is an easy mistake for potential investors to make. They look at the housing market and see it rising, and they immediately assume that any investment is a good investment. And while the housing market is consistently on the rise – on average between 7 and 11 per cent per year – it doesn’t mean that this applies across the board.
What you need to know is exactly what area and location would be the best investment for you. This depends on many factors, including trends in the marketplace and your own budget. Again, you really want to speak to an expert rather than try and take a stab at this yourself. Make sure you pick someone with plenty of experience and expertise that you can bank on, as their skills and knowledge will be vital in your success as a property investor.
3: Investing in Property Is a Get Rich Quick Scheme
While you can make a lot of money from investing in property, it’s by no means something that you should jump into expecting an immediate return. A lot of people out there try and sell this myth that you can make a fortune in property overnight to profit from unsuspecting investors. The reality is that it’s all about patience, timing and knowing the right moves to make.
Property is a very solid investment, and as we explained above, as a financial trend it’s always on the up. The key here is to not expect too much too soon. Wait for the value of your property to rise, and don’t panic if your returns aren’t immediately as high as you had hoped.
4: You Need to Buy Your Own Home First
This is a huge impediment for prospective property investors. They believe that just because they don’t own their own home, that they can’t begin investing in other properties to make a profit.
In fact, we own 12 properties overall and yet we rent the home we live in. Why? Because buying a home to live in is taking money out of your pocket that you could be investing elsewhere. When considering your position as an investor, you need to start thinking about things around you as assets, and your own home isn’t an asset because it’s not making you any money. Start by investing in other properties first, then you’re better placed to generate an income and move onwards from there.
5: Renovation Adds Value to Your Property
Many people see buying a property as the first step in their journey as an investor, and that they then need to renovate that property in order to add value to it. And while this isn’t necessarily false across the board, it’s also not necessarily true.
The reality is that if you spend $50k on renovating a property – for instance, putting in a new bathroom and kitchen – you’re not guaranteed to add that $50k to its overall value.
Before doing any renovation work, you need to be as sure as you can that it will in fact be a worthwhile investment and add value to the property when you eventually come to sell it. This can be a tricky thing to gauge, so again it comes down to surrounding yourself with experts and people in the know who can offer you sound advice that you can count on.
6: You Should Buy a House That You’d Want to Live In
One of the pitfalls that prospective investors fall into is assuming that they’re an expert without having the credentials to back it up. They think that everyone has the same taste and desires as them, and therefore invest in properties that they’d love to live in. Now, even if you’ve got great taste, this won’t always yield financial rewards. There are many factors that contribute to the value of a property that you need to take into account, not just those things that are valuable to you personally.
Instead, you need to know what areas are the most valuable on the property market at the time of purchase, and what renovations and upgrades will add genuine value to your property.
You might have noticed that the way to navigate most of these myths and misconceptions is to have expert advice at hand that you can trust to guide you in the right direction. The most common mistake that people make when getting into property investment is to try and save a few bucks by doing all the research themselves.
We actually made the same mistake ourselves when we first became involved in property investment 20 years ago. We didn’t trust anyone and believed that we could find out everything we needed to know on our own. And you won’t be surprised to learn that we fell into many pitfalls along our journey as a result!
So, don’t make the same mistake that we and many other investors make when they first get into property. Surround yourself with the best of the best, and you’re sure to massively increase your chances of success.