One question every potential property investor should ask themselves is “What does it take to be successful?” Interestingly, almost everyone has a ready answer for what it takes to be a successful property investor. However, many of the answers are wrong and just myths. Others were applicable in the past but no longer relevant. Here are some of the most common myths about property investment.
To Make Money, You Need Money
Nothing could be further from the truth. You don’t have to be incredibly wealthy to invest in real estate. There are more than 1.8 million real estate investors in Australia and most of them have average incomes. To become a property investor, you can use your savings or leverage existing equity in your home. However, never overstretch yourself; always have a financially responsible attitude when investing in property.
Only Buy Properties Close to the CBD
No doubt about it, location is paramount when buying investment property, but that does not mean you can’t find good investments outside the CBD. When purchasing property in a suburb, look for inherent growth indicators such as population growth, rising wage levels, future infrastructure plans, and escalating rental prices. These can help you to determine the investment basics of a suburb to see whether it can deliver long-term growth.
Property Values Always Rise
While this claim is made by many people, it isn’t always true. The increase in a property’s value is usually determined by its location and the price paid at the time of purchase. At times, the price may not rise considerably for the investor to make a profit. Keep in mind that the property market is cyclical and has its ups and downs. In addition, the shift is determined by the economy and can occur very quickly. Property prices can plummet as demand dwindles.
You Can’t Invest Without a Good Credit Rating
When buying your first property, which in many cases may be your home – you need a good credit rating. However, by the time most investors are ready to buy their first investment property, credit is not an issue because they have built up considerable equity in their homes. If you don’t own a property but want to start investing, talk to your bank. Records of regular credit and a strong employment history may be all you need to get financing.
You Can Easily Make Money
Real estate is among the safest long-term investment options. Unlike other investments, you are the sole owner and have total control over your investment. However, you can easily lose a lot of money if you make poor property decisions. You may have difficulty making money if you buy and sell properties every few years and you will be up for high stamp duty costs and possibly capital gains tax.
When it comes to real estate investment, there are many myths thrown around. Believing them can enhance your exposure for risk and have a negative impact on your ability to put together a lucrative and sustainable property portfolio. Ignore the myths about property investment and formulate a sustainable investment strategy.