Noel Whittaker says if you want to invest in property, stop reading the news

Financial adviser Noel Whittaker says headlines about property booms can lure inexperienced buyers into traps.

He also wrote recently that headlines with doom and gloom scenarios can scare people from making a good decision to buy.

"So, if you are serious about investing in property, stop reading the headlines and set yourself a specific plan," advised Noel Whittaker, the author of Making Money Made Simple and numerous other books on personal finance.

"One day we are told that real estate is booming, the next day people like Steve Keen and Harry Dent are predicting falls of up to 40%.

"When a boom is on we are even subjected to articles telling us how much our home is increasing each day, often accompanied by comments that it’s a tax-free gain and worth more than we are earning.

"Of course, it’s all nonsense – capital gain is not something that is happening, it is something that has happened.

"And the sad reality is that a big capital gain last year is a red flag that next year may be very different."

Whittaker noted the principal is called regression to the mean.

"I am not at all troubled by the usual negative comments about property that are circulating at the moment. 

"Australia’s population is on track to reach 40 million within 35 years – this has to be positive for anybody who buys well-located, quality real estate today and hangs on to it for the long term."

He advised there is no such a thing as a single property market – not for Australia, not even for a single capital city – there are myriad property markets all doing their own thing.

"How can you compare a townhouse in Cairns with a mansion in Point Piper?

"All over Australia some markets may be rising, other markets may be falling, and some may be flat."

He also noted real estate figures are notoriously unreliable because they take no account of improvements by owners,

Whittaker advised the first task for prospective investors was to find out exactly what they could afford, which means talking to a lender or mortgage broker, and laying all your cards on the table.

"Then, having worked out your price bracket, you need to research areas where you can buy a property you like for the price you’re able to pay.

"Once you have established that you are in the running, take the time to research the market thoroughly so that you become an expert on the area.

"You do this by going to open houses, befriending local real estate agents, and reading everything you can about your preferred location.

"Then when you come across a genuine bargain you will know that you have struck a winner.

"Always keep in mind that the secret of success in real estate is to buy well, and then add value."