Key takeaways
There are many commonly held beliefs about property investing that aren’t only questionable but are also utterly false.
Sadly, some investors go through their entire property journey believing them. And that’s a shame.
They’d waste precious time buying the wrong property or using faulty strategies because they listened to bad advice.
It’s no secret that much of the financial media has its own biases or is influenced by those with vested interests. And this is particularly true of what you find on social media.
When it comes to property investing, the noise from the financial media can be deafening.
But how much of what they say is really worth your attention?
There are many commonly held beliefs about property investing that aren’t only questionable but are also utterly false.
Sadly, some investors go through their entire property journey believing them.
And that’s a shame.
They’d waste precious time buying the wrong property or using faulty strategies because they listened to bad advice.
Most financial publications and websites shy away from highlighting the potential downsides of investing in property for obvious reasons.
However, if you are serious about investing in property, it’s important to be aware of the following investment truths before you dive in.
Or at the very least, as a reality check.
1. The Market is More Than Just Moments:
The media loves a good story, and in the realm of property, that often translates to ‘hot tips’ and alarming trends.
What they don’t emphasize enough is the cyclic nature of real estate.
Markets move in cycles, and while the media might focus on the momentary ups and downs, successful investing requires a long-term perspective.
Remember, property is a long game, and patient investors are usually the ones who end up with the last laugh.
2. Property investing is simple, but not easy
Now, this is not a play on words.
Just because something is simple to understand doesn’t mean it’s easy to do or make money from it.
If property investing is easy, there will be more people owning two or more properties.
But here are some sobering stats:
Half of those who buy a property sell up in the first five years.
Of those who stay in the game, 92% never get past their second property.
The latest stats show that there are only 19,198 Australians with an interest in six or more investment properties.
Of course, property investing is relatively simple if you follow a time tested, proven strategy.
The problem is that most of us act irrationally and emotionally when it comes to money.
Some of us are too cautious and stay in our comfort zone and invest in our own backyard, while others are in too much a hurry and chase the next hot spot.
3. It takes up to 30 years to become financially free through property
Rarely does the financial media discuss the long-term wealth-building benefits of property investing, such as the potential for capital growth, rental yield increases, and tax benefits like depreciation.
These aspects form the backbone of why many choose to invest in property and they should not be overlooked despite not being as ‘newsworthy’ as the latest market fluctuations.
Despite what you might have heard, especially on social media, it takes time to become rich through property.
It takes two or three cycles to build a substant
ial asset base, therefore, you need to be prepared to hold your investments for a number of years.
Unfortunately, most investors waste the first 5-10 years buying the wrong investments, then they need to sell them off.
The good news is, that with the right strategy, you can speed up the process and achieve your financial freedom sooner.
This is where your trusted mentor and independent advisors could help you immensely.
They can guide you on how to buy well in the right area and how to grow your equity quickly so you can expand your portfolio.
4. Residential real estate is a high growth, low yield investment – don’t look for cash flow from your real estate
If you’re looking to use property as a cash cow, you may have to rethink your strategy.
As a property investor, your job is to build your asset base, not just to get cash flow.
Of course, cash flow is important because it keeps you in the game, but capital growth is what makes you rich and gets you out of your day job.
Growing wealth through property involves going through three stages, namely:
- Accumulation stage: where you focus on growing your asset base.
- Transition stage: now you start paying down loans to lower your LVR. If you’ve invested well and your properties have grown in value, this will happen organically as well.
- Live off your cash machine
5. One Size Doesn’t Fit All:
Ever noticed how a single market report can send waves of general advice that seems to apply to everyone?
In reality, property investing is deeply personal.
Your strategy should be tailored to your financial situation, your investment goals, and your risk tolerance.
The ‘best’ investment for someone else might not be the right fit for you.
Customize your approach based on detailed research and personal circumstances, not just broad market trends.
6. The banks are not on your side
Let’s be blunt… banks are in the business to make a profit.
That means your bank wants to make money out of you.
This doesn’t mean bankers aren’t trustworthy but beware that the mortgage they’re selling you may not be the best product for you.
Without a piece of independent advice from a finance strategist, you could also end up paying higher fees and interest rates.
Or worst, unable to get the finance you need to invest in property.
7. No one really knows where the property markets are heading
No matter how much data is quoted or analysed, no one can really accurately predict how the property markets will behave in the future.
If you’re counting on your property to grow in value year after year, you will be sorely disappointed because growth in property values is never linear and there are many factors that are out of your control, no matter how diligent you are.
If you treat your property investments like a business, buy investment-grade properties, invest for the long term and ensure you have sufficient buffer to cover rate rises, vacancies, maintenance issues and any other surprises you have a greater chance of riding the property market cycles.
8. Fear Sells, But You Shouldn’t Buy It:
There’s a reason why dramatic predictions grab headlines; fear is a powerful motivator.
However, making decisions based on fear can be disastrous in property investing.
It’s essential to stay informed but remain skeptical of doomsday predictions and overly optimistic forecasts alike.
Balance is key, and so is staying grounded in solid, unbiased research.
9. The Real Story Behind the Data:
Headlines often throw around statistics that make for compelling reading but digging deeper is crucial.
For instance, national averages can obscure what’s happening locally.
A median price increase nationally might not mean much if your area of interest is stagnant or declining.
That’s because there is not one property market
The media tends to talk of the “Australian” property market or “Melbourne” Property market.
But the truth is, each state has its own cycle and there are markets within markets – different price points, types of property and geographic locations
Sure it’s important to look at the big picture but also consider the microcycle of the suburb you’re investing in.
This way, you won’t miss great opportunities just because the headline data isn’t impressive.
It’s no secret that much of the financial media has its own biases or is influenced by those with vested interests.
And this is particularly true of what you find on social media.
Whether it’s pushing certain markets, developments, or even panic to increase readership, it’s important to recognize these potential conflicts of interest.
Always question the motive behind the information you’re consuming and seek multiple sources to get a well-rounded view.
Final Thoughts
As you can see, there’s a lot of confusing information about property investing out there, and a pragmatic eye (and a willingness to seek independent advice) goes a long way in helping you succeed as an investor.
Remember, it’s your money.
Be careful what you read and who you listen to because investing in property is not just about following the trends highlighted in the news.
It’s about thorough analysis, understanding the nuances of your market, and staying committed to your long-term financial goals.
By looking beyond the headlines and questioning the mainstream narrative, you can make more informed decisions that align with your vision for financial success.
Remember, in property investment, knowledge isn’t just power—it’s profit.
