Real Estate Investment Myths (Part 1)
Updated: Jul 2
There are a lot of misconceptions around buying property for investment purposes, especially if you're a first time investor. At Real Estate Investment Finance, we like to ensure that we're providing our clients with accurate information regarding their investment strategy. In this article we're going to share five out of ten common myths surrounding real estate investing.
Myth 1: You should only invest in cities
This is probably the biggest myth around buying property for investment purposes. Many people believe that only capital cities will produce high rental yields. Though, this is not always the case. In fact, property commentator, Michael Yardney has stated that some city suburbs actually present buyers with low yields, high prices and oversupply of property. If you're attempting to build a successful property portfolio, this can be damaging.
You should diversify in the investment space by buying property that will provide you with the potential for long term growth. Properties that will provide long term growth are generally those with rising populations, infrastructure developments and future plans, as well as high levels of local supply and demand. Regional markets are proving to be great markets to invest in property. Ballarat, a regional market (located in Victoria) saw a 32.4% jump in median house price in the last three years, whereas Sydney's decreased by 1.7%.
Myth 2: You need a lot of money to be a property investor
DO NOT believe this myth! Everyone has to start somewhere, right?
Many people believe they need a lot of money to build their property portfolio. Though, they often neglect to consider this thing called equity, which is the current market value of your home. Equity is calculated by subtracting how much you purchased your house for by how much you're still owing on your home loan. You can use equity in an existing property to fund an investment purchase.
As a niche business, we assist investors from the beginning to end process of real estate investing, we have a team of finance specialists who can sit with you to map out your finances. Our specialists review your current financial situation to determine the costs and returns that you can expect to generate from a positively geared investment strategy.
Fun fact: did you know that most investors who own at least two to three properties are earning average wages?
Myth 3: You should only buy in locations that you're familiar with
Similar to only buying in cities, many investors think that they should buy an investment property in a nearby suburb to where they're living. Though, this isn't always the best move. In fact, it doesn't matter where you're investment property is located, so long as you are purchasing one that will see you maximise on returns.
When looking at property, establish your investment strategy. Determine what it is that you want to achieve from it. Ideally you should be looking at lifestyle features that the area will offer potential tenants. You also need to determine the economic and infrastructural components within the property's location. When researching the right location, look for the following factors:
Past capital growth trends
Stock on the market
Average time to sell property
At REIF we have a property acquisitions team that is monitoring the best markets and locations. Our property specialists will be able to work with you to determine the best location for you when buying property.
Myth 4: You need to wait for the right time to invest
It's not about timing the market, rather, it's about having the right time in the market. The truth is, property values are only expected to increase in coming years. Across Australia, we're expected to see a 30% increase to housing values within the next three years. Housing inventory is low at the moment but demand for houses is high. If anything, this moment in the housing market is proving to people that they shouldn't wait. Now is the time to invest!
Myth 5: Negative gearing is a good investment strategy
In the current market people are investing to make money from day one, not hope that their investments are going to work for them in the future. At Real Estate Investment Finance we work with investor clients to ensure that they're buying property that's positively geared. This helps them to generate a passive income. We work by structuring our clients finances to ensure that they're property is cash flow positive and can put anywhere between $50 to $300 + into their pocket each week after bills and tax.
Reach our for a FREE consultation
If you're interested in real estate investing and building your property portfolio, we'd love to be able to assist you. For a FREE no-obligation consultation with one of our specialists, feel free to reach out on the details provided below. There is truly no better time than now to make property your investment strategy. So don't wait!
Ph: 1300 130 932