Busting property investment myths
There are a lot of property investment myths out there, and with nearly 50 years in the business, we’ve seen a few!
Here we take a look at some four property investment misperceptions.
#Myth 1: Only rich people can invest in property
Having cash is helpful when purchasing an investment property but the vast majority of property investors are not cash buyers! According to ATO’s data most recent data, about one in five (21%) Australian households owned a residential property other than their usual residence in 2019–20. These properties include those that are being rented out as residential investment properties and also those used for other purposes, such as holiday homes.
Of the 2.02 million households who, in 2019–20, owned a residential property other than their usual residence:
- 68% owned a single property.
- One in twenty-five (4%) owned four or more properties.
- Owners were most likely to reside in either New South Wales (33%) or Victoria (29%).
- 36% were in the highest quintile of equivalised disposable household income.
- Over one in ten (13%) households were in the lowest quintile of equivalised disposable household income
Purchasing an investment property isn’t exclusive to having accessible cash flow; investors can use the equity within their home and refinance their mortgage.
Others use the rentvesting strategy – whereby you rent a property to live in that’s right for your lifestyle, while you own an investment property that’s right for your budget.
Rentvesting is increasing in popularity due to its accessibility and flexibility for first home buyers.
#Myth 2. Buying a property in a trendy area is the best strategy
While properties in a trendy area are more likely to be rented out, and generally will increase in value over time, there are many factors to consider; popular suburbs come and go, and what was considered a desirable location one year, may not be so desirable a few years down the track.
Furthermore, properties in a desirable location, such as next to the beach, proximity to good schools, jobs and amenities all attract a higher rental income, but properties in these locations often come with a higher price tag, and hence more outgoings.
Properties in the next couple of suburbs along may give a better rental income simply because you’ve paid substantially less for the property, and you’re not paying as much in terms of interest on your loan, and they may perform better in terms of capital growth.
#Myth 3: Investors should only buy new
New properties frequently come with higher price tags, which don’t always equate to a higher income. Tenants look more for location and a property which suits their lifestyle
While many property investors think depreciation only applies to new properties, depreciation should be in your investment property strategy regardless of the age of the property; in this blog post we explain where depreciation is available on older ones.
As well as having less of a price tag, another plus to older properties is they offer greater potential to improve and add value.
#Myth 4: Any property is a good investment
Everyone needs somewhere to live, so surely this one is correct?
The key to a good invest property isn’t just about owing one, it’s owning the right one – one which is located close to amenities, appeal to a range of tenants, and is likely to perform well in terms of capital growth.
#Myth 5: Self managing will save money
This is probably the most common myth going. Self-managing may save a few dollars, but what is it costing in other ways? Have you got the time to look for tenants, screen them, and do all the necessary paperwork behind the leasing process. Then there’s the ongoing inspections and maintenance – do you really want that call just as you’re heading to work because there’s a blocked drain or burst pipe? And do you know the law?
As well as knowing the law, and attending regular industry training sessions, our team will save you time and take away the stress which sometimes go with property management. We ensure all the paperwork is in order, manage your tenant and we give you the information to make informed decisions.
Plus, the cost of our property management service is a tax-deductible expense.
As one of Newcastle’s longest established real estate offices, we know property. Whether it is from an investment or homeowner’s point of view, we’re always looking at innovative ways to help you get the best from your asset.
We’ve helped thousands of people live their financial dreams through property so if you would like to know more about our services, simply give us a ring on 02 4954 8833, send us an email to mail@apnewcastle.com.au or pop into our Cardiff office for a chat.