Property Investment Myths Exposed
Although property investment has the potential for huge returns, many people jump into the market and wind up getting burned by it.disclosure
There are many reasons for this, but one of the most prevalent is the widespread and commonly believed myths and misconceptions surrounding the property market. Obviously, you’ll want to protect yourself from these if you’re about to take your first steps into the property market. Here are some of the most common ones to be aware of…
Cash Flow is King
Yes, high-yielding properties can be a great source of passive income, but ask any experienced property investor, and they’ll tell you that cash flow isn’t the be-all and end-all of a good investment. Capital growth is what will make you wealthy in the long term, and what you should be focussing on more.
The overarching aim of any investment is to see an increase in asset value, but in order to keep your assets in the long term, you’ll need to service your debt, which strong cash flow and decent rental yields will help you achieve.
Only Buy Properties Near the CBD
Yes, location is still extremely important when it comes to purchasing an investment property, but that doesn’t mean there aren’t some very appealing apartments and homes for sale outside of the CBD of any given city. When it comes to the suburbs, you should be considering intrinsic growth factors such as a growing or shrinking population, infrastructure plans for the future, rising rental prices, increasing wages, and the average property price compared to neighboring suburban areas.
Studying all of these indicators is essential to ascertaining the investing fundamentals of a given suburb, and determining whether or not it has the potential to deliver real, long-term growth.
New Property Is Always Better Than Old Property
New-build, off-the-plan properties can give you a range of benefits as a property investor, such as pinning down today’s prices and maximizing available depreciation which can help you save a lot of tax. However, there are also a number of risks that you need to keep an eye on, such as the market falling between you paying the initial deposit and settling.
There are also numerous things that can go wrong between you investigating a new development and the planned buildings actually being completed. There is a range of pros and cons tied to both new-builds and older properties. Make sure you’re familiar with them before planning out your first few investments.
Property Prices Are Always on the Up
This is one of the most reckless, and unfortunately one of the most commonly believed myths about property investment. If you hear it, don’t believe it! Depending on the price you pay at the time, and the area of the property, its value may not rise enough for you to ever make a profit from it. Remember that the property market is cyclical, and has periods of booms and dips. Mining towns are particularly notorious for this. Depending on the state of the economy, these shifts can happen extremely quickly with very few warning signs.