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7 Property Investment Myths

property investing myths

There are many myths and misconceptions thrown around when it comes to property investment. 

Believing these property investing myths and making purchasing decisions because of them can increase your exposure to risk and affect your ability to build a profitable and sustainable property portfolio.

So here are some common property investment myths that you need to be aware of in order to help you plan a successful property investment strategy.



Myth 1: Property prices always increase

You may have heard this claim before, but it's not true.

Depending on the price paid at the time and the location, the property value may not rise significantly enough to ever turn a profit.

It's important to remember that the property market is cyclical with periods of booms and declines. Mining towns are notorious for this, with very clear periods of boom and bust cycles.

Depending on the economy, the shift can happen quickly and result in property prices quickly falling as demand falls.


Myth 2: Only the wealthy can afford to invest in property

This depends on your definition of wealthy and all prosperity is relative.  What is true is that Australia's love affair with property is well known, there are now more than 1.8 million property investors in Australia and lots of those will have "average incomes" yet still build profitable portfolios.

Many investors can take their first steps into property by leveraging existing equity in their home or by accessing hard earned savings.

Others may buy off-the-plan which can involve securing a property at today's prices yet not having to settle until a future date – this is often a period of up to 18 months or in some cases even longer.

Always enter into any investment with a financially responsible attitude and do not over-stretch yourself, especially in the early stages. 

If you are a first time property investor, this on-demand webinar can show you how to get started in property investment.

Myth 3: Cash flow is always king

It is true that high yielding properties can help you create a passive income, but experienced property investors will tell you that while cash flow is the oxygen that can help you build your portfolio, capital growth is what will make you wealthy in the long term.

The whole point of any investment is to see an increase of the asset value, but in order to hold your assets long term you will obviously need to service your debt, which strong rental yields and good cash flow can help you achieve.

This pack of free suburb reports can help you target high cash flow and growth suburbs and can get your next property search off to the perfect start.

Myth 4: Only purchase properties within a few kilometres of the CBD

Location is important when purchasing investment property, but that doesn't mean there aren't great investments outside of the CBD. 

Look for the intrinsic growth indicators within a suburb including:

  • Population growth
  • Future infrastructure plans
  • The suburb's past performance in terms of median growth rates
  • Increasing wage levels in the area
  • Rising weekly rental prices
  • Comparing prices in neighbouring suburbs

All these indicators can help you ascertain the investment fundamentals of a suburb to determine whether it could deliver long term growth.

If you are a Real Estate Investar member, you can check the suburb fundamentals of any suburb nationally using Investar Search.


Myth 5: Buying new property is better than buying old property

Newly built or off-the-plan properties are appealing and can give you many benefits as a property investor including securing the property at today's prices and maximising the available depreciation which can help you save tax. 

Real Estate Investar members can use Development Search, our off-the-plan search engine, to find and analyse new property. Watch a demo here.

There are risks however which you need to be aware of, including a falling property market between you paying the initial deposit and settling in the future and when buying off-the-plan you will not know exactly how the property will look when construction is complete.

For a full list of the pros and cons of buying off-the-plan, please click here.

Myth 6: Purchasing below market value guarantees profit

It depends on how the market value was defined at the time and that value may not hold up in the future.

For example, if the property is purchased below market value at the height of the boom it can still be a poor investment in the short term if the property cycle shifts into a decline and your property drops in value.

This table demonstrates some hypothetical figures of the amount of discount you could expect to achieve, depending on the state of the market.

Investing throughout the property cycle

Market Stage Boom Bust Flat line
Level of discount -5% to -10% -20% to -30% -10% to -15%

During a booming market, it will generally be more difficult to achieve higher discounts because of the number of buyers in the market and the high levels of demand.

Conversely, during a bust market, there will tend to be less buyers and an abundance of properties for sale, so it can be easier to achieve larger discounts.

Learn more about buying property investment at a discount here.

Myth 7: Only buy in locations that you are familiar with 

Don't fall into the trap of believing you should only invest in an area that you know well.  

Differentiate between knowing the lifestyle features of an area, and the economic and investment fundamentals that you can research to determine its feasibiilty as a potential investment location.  

You can research indicators including:

  • Historic capital growth trends
  • Rental yields
  • Vacancy rates
  • Demographic data
  • Auction clearance rates
  • Stock on market
  • Average time to sell

Real Estate Investar members can access all this information  using our all-in-one property investment platform. For more information please see our video tutorials.

These myths can often create the wrong mindset in property investors, so being aware of them can hopefully help you achieve your long term property investing goals.

The key to your success lies in making informed decisions based on accurate and timely research. Your aim should be to buy the right property, at the right time, in the right location, at the right price.

Treat your property investing as a business, set clear financial goals and take a long term view of your investments.

Looking to take action with your property investing?

Book in your complimentary, personalised demo today and learn how we can help you get the facts and invest better. When's a good time to talk?

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