5 myths about property investment, busted!

5 myths about property investment, busted!
Jonathan ChancellorJune 29, 2017

SPONSORED POST

You can always find reasons why you shouldn’t invest in property. Property investment can seem like a big step and it’s easy to be fearful.  You’ll also hear lots of stories either from others or in the media, which may put you off.

So let’s break down some of the common myths floating about that can scare potential investors.

67 percent of investors using negative gearing have incomes of $80,000 or less.

1. You need a big deposit to invest in property

Not true. Property investment is no longer exclusively the domain of the wealthy. Smart investors who buy wisely, in high yielding areas with good capital growth, can have positively geared properties that cost them very little out of pocket. The Australian Tax Office figures found that 67 per cent of investors using negative gearing have incomes of $80,000 or less. This is not to say that all these investors are successful, but they have certainly been able to break into the market. 

Now, let’s look at the claim you need a giant deposit. Again, this isn’t correct. You can still get into the property market without a deposit by either leveraging off an existing home or getting a guarantor loan through relatives. Using super via an SMSF is another option.

Many property investors don’t own their own homes and so they rent in the suburb they want to live while having a portfolio somewhere else.

2. The market is skewed against first home buyers

There’s been a spate of media stories about how first time buyers are finding it increasingly difficult to break into the big property markets of Sydney and Melbourne. Property investors are blamed for this. However the reality is that there’s a myriad of factors. Basically Sydney and Melbourne are highly desirable places to live. Consequently population has skyrocketed; more global companies have shifted here and both cities are now firmly on the radar of international investors. The good news is that the demand to live in both cities is very unlikely to go down.

The other good news is that first home buyers are now becoming first time investors or “rentvestors”. The line between ‘first time buyers’ and ‘investors’ is very much blurred. The reality is many property investors don’t own their own homes and so they rent in the suburb they want to live while having a portfolio somewhere else.  This is the new reality for the majority of people in most capital cities of Australia as prices gallop to stratospheric levels.

3. Foreign investors make it harder to break in

This is a common complaint from locals especially in Sydney and Melbourne. Surely all the Asian investors buying up so much land and units in the cities is shutting out local investors? Actually, it’s not.

The Federal Government launched the Murray Inquiry in 2014 to look at this very issue. The inquiry found that: “foreign investment is regarded by industry experts as vital to increasing this supply. Rather than causing price pressures, the evidence suggests that foreign investments may actually help keep prices lower by increasing supply.”

It’s also worth noting that foreign investors are often playing in a different pool to local investors. They are restricted from buying established homes and can only buy newly developed properties.  This is why foreign investors are great for the construction industry, as they need more housing stock to be built.  So foreign investors help keep up a demand for supply and the market buoyant.

Your property investment, like the DPN Seconda, needs to be in a growing area with excellent infrastructure and a demand for rentals.

4. It’s best to buy in your local area

This is similar to the myth that says you should buy an investment home you’d like to live in yourself.  The reality is you may never see or visit your investment property. The property you invest in may be thousands of miles away, in another state. Investment can’t be an emotional decision where you buy a house in an area you like that you may want to live in. The investment needs to be based on cold hard facts and data. It needs to be a property with good capital growth in a growing area with excellent infrastructure and a demand for rentals. If it turns out that you have a property you do want to live in at some point, that’s a big bonus. However, as much as we get emotionally invested in properties, that can’t be part of the strategy.

Doing a renovation is no longer a guarantee that it will add exceptional value to the property.

5. Buy, renovate and sell for a quick profit

This idea of buying a rundown property, renovating and then selling quickly afterwards is out of date. Firstly, while the market may rise in the time you’ve bought and then sold, will it really have risen enough to cover all your costs? Plus, you’ll be hit with stamp duty and other property taxes, which will take the sugar out of any profits. We’re seeing now that the land is viewed far more favourably than the house that’s built on it. So that is why rundown, derelict houses on prime inner city land are often just left as they are and sold for a high price. Doing a renovation is no longer a guarantee that it will add exceptional value to the property. Finally, you’re missing out on the long-term capital growth. Good property investors think in the long term.

In conclusion, it’s dangerous to believe popular myths about property investment. No one ever made a fortune by listening to Chinese whispers. Any decision or strategy you make should be informed and backed by data and solid research.

To read the original article, click here.

For more information from DPN.

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

Editor's Picks

Orchard Piper secures $20m record-breaking penthouse sale at One Toorak Place
UEM Sunrise begin sales at One Oval, new Subiaco apartment development
"One of the rarest finds on the Mornington Peninsula": Inside Hali Dromana
BLVD pursues WELL Certification as demand for healthy homes grows
Off the plan apartment buying 101: What is BESS?

Related Projects

16-22 Maud Street, Newstead QLD 4006
16-22 Maud Street, Newstead QLD 4006
16-22 Maud Street, Newstead QLD 4006
Price
Contact agent
35-37 Mount Street, Prahran VIC 3181
35-37 Mount Street, Prahran VIC 3181
35-37 Mount Street, Prahran VIC 3181
Price
Contact agent
118-124 Benelong Road, Cremorne NSW 2090
118-124 Benelong Road, Cremorne NSW 2090
118-124 Benelong Road, Cremorne NSW 2090
Price
Contact agent
118-120 Matthew Flinders Drive, Cooee Bay QLD 4703
118-120 Matthew Flinders Drive, Cooee Bay QLD 4703
118-120 Matthew Flinders Drive, Cooee Bay QLD 4703
Price
Contact agent
26-62 Kinross Road, Thornlands QLD 4164
26-62 Kinross Road, Thornlands QLD 4164
26-62 Kinross Road, Thornlands QLD 4164
Price
Contact agent
9-11 Baroonba Street, Whitebridge NSW 2290
9-11 Baroonba Street, Whitebridge NSW 2290
9-11 Baroonba Street, Whitebridge NSW 2290
Price
Contact agent
18 Ransley Street, Penrith NSW 2750
Perle, East Side Quarter, Penrith - 18 Ransley Street, Penrith
18 Ransley Street, Penrith NSW 2750
Price
Contact agent
Ernest Cavanagh Street, Gungahlin ACT 2912
Raya, Gungahlin - Ernest Cavanagh Street, Gungahlin
Ernest Cavanagh Street, Gungahlin ACT 2912
Price
Contact agent
39 Browning Street, South Brisbane QLD 4101
39-41 Browning Street, South Brisbane - 39 Browning Street, South Brisbane
39 Browning Street, South Brisbane QLD 4101
Price
Contact agent
675 Gardeners Road, Mascot NSW 2020
Kiara North, Mascot - 675 Gardeners Road, Mascot
675 Gardeners Road, Mascot NSW 2020
Price
Contact agent
187 Salvado Road, Jolimont WA 6014
Jolie, Jolimont - 187 Salvado Road, Jolimont
187 Salvado Road, Jolimont WA 6014
Price
Contact agent
47 Maning Avenue, Sandy Bay TAS 7005
Grace Residences - 47 Maning Avenue, Sandy Bay
47 Maning Avenue, Sandy Bay TAS 7005
Price
Contact agent
Cove Lane, Narooma NSW 2546
Cove, Narooma - Cove Lane, Narooma
Cove Lane, Narooma NSW 2546
Price
Contact agent
52-56 Ramsay Street, Five Dock NSW 2046
Ava, Five Dock - 52-56 Ramsay Street, Five Dock
52-56 Ramsay Street, Five Dock NSW 2046
Price
Contact agent
2375 Gold Coast Highway, Mermaid Beach QLD 4218
The Alfred - 2375 Gold Coast Highway, Mermaid Beach
2375 Gold Coast Highway, Mermaid Beach QLD 4218
Price
Contact agent
129-131 Russell Ave, Dolls Point NSW 2219
ALLURE COLLECTION - 129-131 Russell Ave, Dolls Point
129-131 Russell Ave, Dolls Point NSW 2219
Price
Contact agent
62 Constitution Avenue, Parkes ACT 2600
The Eastbourne on Commonwealth Park - 62 Constitution Avenue, Parkes
62 Constitution Avenue, Parkes ACT 2600
Price
Contact agent
155 Old Burleigh Road, Broadbeach QLD 4218
Sandpiper, Broadbeach - 155 Old Burleigh Road, Broadbeach
155 Old Burleigh Road, Broadbeach QLD 4218
Price
Contact agent
33 Vulture Street, West End QLD 4101
33 Vulture Street, West End QLD 4101
33 Vulture Street, West End QLD 4101
Price
Contact agent
19 Governor Terrace, Murarrie QLD 4172
Park Hill Village Collection, Murarrie - 19 Governor Terrace, Murarrie
19 Governor Terrace, Murarrie QLD 4172
Price
Contact agent
122 Marine Parade, Miami QLD 4220
Nalu, Miami - 122 Marine Parade, Miami
122 Marine Parade, Miami QLD 4220
Price
Contact agent
34 Jacaranda Place, Indooroopilly QLD 4068
34 Jacaranda Place, Indooroopilly QLD 4068
34 Jacaranda Place, Indooroopilly QLD 4068
Price
Contact agent
167 Old Burleigh Road, Broadbeach QLD 4218
167 Old Burleigh Road, Broadbeach QLD 4218
167 Old Burleigh Road, Broadbeach QLD 4218
Price
Contact agent
21 Queens Way, Yeerongpilly QLD 4105
Yeerongpilly Green - 21 Queens Way, Yeerongpilly
21 Queens Way, Yeerongpilly QLD 4105
Price
Contact agent
445-449 River St, Ballina NSW 2478
Solhaven - 445-449 River St, Ballina
445-449 River St, Ballina NSW 2478
Price
Contact agent
52 Sunset Boulevard, Surfers Paradise QLD 4217
52 Sunset Boulevard, Surfers Paradise QLD 4217
52 Sunset Boulevard, Surfers Paradise QLD 4217
Price
Contact agent
6 Jack Brabham Drive, Hurstville NSW
Horizon Hurstville - 6 Jack Brabham Drive, Hurstville
6 Jack Brabham Drive, Hurstville NSW
Price
Contact agent
49 Seena Drive, Edgeworth NSW 2285
49 Seena Drive, Edgeworth NSW 2285
49 Seena Drive, Edgeworth NSW 2285
Price
Contact agent
Lot 118 Ocean Steamers Road, Port Adelaide SA 5015
Lot 118 Ocean Steamers Road, Port Adelaide SA 5015
Lot 118 Ocean Steamers Road, Port Adelaide SA 5015
Price
Contact agent
203 Ashmore Road, Benowa QLD 4217
203 Ashmore Road, Benowa QLD 4217
203 Ashmore Road, Benowa QLD 4217
Price
Contact agent
774 Ripley Road, Ripley QLD 4306
774 Ripley Road, Ripley QLD 4306
774 Ripley Road, Ripley QLD 4306
Price
Contact agent
6 Homelea Court, Rivervale WA 6103
6 Homelea Court, Rivervale WA 6103
6 Homelea Court, Rivervale WA 6103
Price
Contact agent
7002 Ripley Road, Ripley QLD 4306
7002 Ripley Road, Ripley QLD 4306
7002 Ripley Road, Ripley QLD 4306
Price
Contact agent
3 Delos Way, Sorrento WA 6020
3 Delos Way, Sorrento WA 6020
3 Delos Way, Sorrento WA 6020
Price
Contact agent
77 Sutton Street, Redcliffe QLD 4020
77 Sutton Street, Redcliffe QLD 4020
77 Sutton Street, Redcliffe QLD 4020
Price
Contact agent
181 Prospect Road, Prospect SA 5082
181 Prospect Road, Prospect SA 5082
181 Prospect Road, Prospect SA 5082
Price
Contact agent
593-595 Albany Highway, Victoria Park WA 6100
593-595 Albany Highway, Victoria Park WA 6100
593-595 Albany Highway, Victoria Park WA 6100
Price
Contact agent
1-28, 40 Civic Way, Rouse Hill NSW 2155
1-28, 40 Civic Way, Rouse Hill NSW 2155
1-28, 40 Civic Way, Rouse Hill NSW 2155
Price
Contact agent
1F Ashline Street, Wollert VIC 3750
1F Ashline Street, Wollert VIC 3750
1F Ashline Street, Wollert VIC 3750
Price
Contact agent
119 Queen Street & 86 King Street, Bendigo VIC 3550
119 Queen Street & 86 King Street, Bendigo VIC 3550
119 Queen Street & 86 King Street, Bendigo VIC 3550
Price
Contact agent
22-38 & 27-31 The Avenue, Coburg VIC 3058
22-38 & 27-31 The Avenue, Coburg VIC 3058
22-38 & 27-31 The Avenue, Coburg VIC 3058
Price
Contact agent
93-97 Bay Street, Brighton VIC 3186
93-97 Bay Street, Brighton VIC 3186
93-97 Bay Street, Brighton VIC 3186
Price
Contact agent
1260-1272 Malvern Road, Malvern VIC 3144
1260-1272 Malvern Road, Malvern VIC 3144
1260-1272 Malvern Road, Malvern VIC 3144
Price
Contact agent
472 Regency Road, Prospect SA 5082
472 Regency Road, Prospect SA 5082
472 Regency Road, Prospect SA 5082
Price
Contact agent
273A Gorge Road, Paradise SA 5075
273 Gorge Road, Paradise SA 5075 - 273A Gorge Road, Paradise
273A Gorge Road, Paradise SA 5075
Price
Contact agent
270 The Esplanade, Miami QLD 4220
270 The Esplanade, Miami QLD 4220
270 The Esplanade, Miami QLD 4220
Price
Contact agent
5 Charles Street, Charlestown NSW 2290
5 Charles Street, Charlestown NSW 2290
5 Charles Street, Charlestown NSW 2290
Price
Contact agent
208 Meadowlands Road, Carina QLD 4152
208 Meadowlands Road, Carina QLD 4152
208 Meadowlands Road, Carina QLD 4152
Price
Contact agent
27-29 Dethridge Street, Northgate QLD 4013
27-29 Dethridge Street, Northgate QLD 4013
27-29 Dethridge Street, Northgate QLD 4013
Price
Contact agent
Lot 100 Maryvale Road, Athelstone SA 5076
Lot 100 Maryvale Road, Athelstone SA 5076
Lot 100 Maryvale Road, Athelstone SA 5076
Price
Contact agent