Purchasing a property is one of the biggest investments people make and having the right information is critical to success.
To help with this, we debunk three prevailing myths that, if heeded, could lead to costly mistakes.
We explore three common myths and potentially dangerous advice on property investment:
- Only wealthy people can invest in property
- It’s best to buy in familiar locations
- Property investment guarantees you’ll get rich quick
Myth 1: Only the wealthy can invest in property
Contrary to popular belief, most Australian property investors are ‘mum and dad’ investors: non-professional, small-scale investors. According to data from schedules completed by BMT Tax Depreciation, most investors own just one investment property.
What’s more, purchasing an investment property isn’t exclusive to having accessible cash flow, investors can use the equity within their home and refinance their mortgage.
Another strategy is rentvesting, rentvesting is a home-owning strategy where 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-time buyers.
Myth 2: It’s best to purchase in familiar locations
Investors shouldn’t succumb to the notion that only familiar areas are worth buying in.
When evaluating potential locations, it’s crucial to factor in elements like population and infrastructure growth, proximity to public transport and shopping hubs, as well as rental demand.
After researching these factors, the information found will often help investors decide on the type of property, tenant and location they’re after.
Myth 3: Property investment will get you rich quick
Investing in property has the potential to build wealth and create a strong long-term financial plan, however, it’s not quick way to get rich.
Investors should ideally hold their properties for 10 years. If you look at Australian house prices historically, over the last three decades, from 1991 to 2021, they have recorded periods of extreme growth, contrasted with periods of weakness. With the benefit of time, the peaks and troughs tend to even out, with house prices recording an average annual rate of growth of 6.4% over this time.
