By Sydney-based high profile property and finance leader, Ayda Shabanz.
The land is the only type of real estate worth investing in is just one myth currently stopping people from investing in the Australian property market. Television series that center around buying, renovating and selling the property, then selling for a high profit in short time frame, are largely responsible for shaping and spreading common myths that confuse today’s prospective property investors.
One of the popular myths advises against investing in land only. Investors can absolutely make money on apartments and other forms of property investment, not just land. In fact, often investors can make more money on apartments that are in desirable suburbs close to the CBD than on a block of land in the middle of nowhere.
Along similar lines, another assumption is that the cheaper the investment, the more profit is made. Property investment absolutely does not work on a linear scale and this can make it difficult to make calculations by yourself. It is another reason I always suggest working with an industry expert.
Often an investor may spend more money on a property purchase and make a fantastic return. This particular calculation is actually a lot more about the location of the property and of course the property itself. Is it in a handy location and is it a desirable property to live in? These are questions that will determine demand from tenants and the rental price it will attract. The more desirable the home is, the more money can be asked for – the simple supply and demand equation.
Property investment does not always involve renovation either.
We have all watched shows about house flipping on TV, where the investors purchase a property, give it a facelift and then sell it to make a sizeable profit, all within the 30-minute program. Usually, these shows are best advised to be seen as entertainment, rather than educational material.
Often renovating property can be a great strategy for investment, but it shouldn’t be a rule of thumb either. Not everyone is financially or personally placed for property renovation. Again, I advise people to get expert advice for their own situation. Sometimes property renovation is a perfect strategy for specific homes in specific suburbs, but it is by no means the only available way to make money through property. In fact, enormous mistakes can be made when investors try to over-capatilise on a property without knowing enough about the suburb.
Another popular myth is that an investor should only invest in property they know personally and is within regular reach. Many first-time investors will invest in property sight unseen! However, this should only ever be done under the guidance of an industry expert.
Many of the investors she consults to will invest in property interstate, therefore cannot be seen prior to going ahead with the investment. Whenever I discuss property investment, it is assumed that you need to be wealthy to invest but that’s another myth. Investors can even maintain the lifestyle to which they have become accustomed to before investing, with expert advice that is specialized to their situation.
Another of the most common myths that have been blocking many people from becoming investors is that a 20% cash deposit is required. Investors don’t actually need to have that level of cash saved. An expert will assist them with other means of a deposit such as the equity in their home. Again, everyone is different so this is why it’s important to obtain expert advice rather than googling for advice that is likely to turn out to be a myth at the end of the day.