Expert Advice by Lindy Lear
03/07/2014
Property investing is my favourite topic of conversation. I love speaking to people who are keen to learn how to invest in property. However I am often surprised at the misconceptions many people have about investing and hope the following information is helpful to budding investors.
Misconception 1: Buying cheap is best to get started
Looking for cheap properties may seem easy but for many novice investors it can lead to impulsive and bad decisions from rushing to buy the first and cheapest property they find. A cheap property is cheap for a reason. Other factors such as the location, the rental demand, the rental amount and the potential for capital growth need to be taken into consideration as well. So how do successful investors do it? They know their criteria before they start looking. They know their budget, but they focus on finding a property that meets their strategy and their criteria. The property must tick all the boxes, not just price alone.
Misconception 2: Buying locally is best
It surprises me how people still believe that their local area where they live is the best place to invest because they “know that area”. There are many areas around Australia that tick all the boxes as a good investment, and are in the right stage in the property cycle to buy. But who has the time to research all over Australia? If you don’t have the time or the experience, then find someone who has and follow their recommendations. You may end up with a property that performs better in your portfolio than the house next door or in the next suburb.
Misconception 3: Buying new properties is too expensive
Many investors feel they need to touch, feel and see a property before they buy. It has to be “real” and established. As there are so many established properties on the market to choose from it must be easier. They may have the misconception that new properties are more expensive and not suitable as an investment. However it may surprise budding investors to know that there are many savings to be made in buying a new property. Savings can be made on the entry price if buying early into an off the plan development. Savings on stamp duty can also be made when building a new investment house & land package, and there are also home buyer incentives in some states for new properties. Tenants are very attracted to new properties and are willing to pay higher rents, and there are higher tax benefits on new properties that increase the positive cash flow. Amazing!
Misconception 4: Buying online is easy
Using real estate websites to find property should be easy. Right? Just enter in a price range or location and then go shopping. If it was that easy everyone would be doing it that way. Even if you researched your location and know your criteria there are many traps for the unwary. I recently had a client who located a builder online and was shown a house and land package at a price that met his budget. He was ready to buy, sight unseen and contacted me for some advice. I suggested that he ask for more information, as I knew the area had power lines. Once the investor had the estate plan I could point out the high voltage power lines running through the suburb and the estate. He thanked me for the advice that saved him from making an unwise investment.
Ask the Right Questions
Asking the right questions when deciding on a property can be critical. Your favourite question should be “Why should I buy this property?” Check if it meets your criteria and your strategy. If you cannot get a satisfactory answer, then you may be making a bad investment decision. If you need help then find someone more experienced to guide you as to the right questions to ask. You can then move past any misconceptions and into your first or next property.
My perfect property that I look for is a good value, well researched well located property, in an area with all drivers for future growth, good rental yields to support the property and make it cashflow positive, and good demand for tenants so I have no vacancy periods.
Happy investing!
Lindy Lear is a successful property investor who had a late start into investing, yet she built a portfolio of eight properties in just three years. She is a qualified property advisor and general manager of Rocket Property Group, and she won the Reader’s Choice Award in 2009, 2012 & 2013 for Property Investment Advisor of the Year. Lindy is passionate about helping others realise their goals through investing in property, and can be contacted on Ph: 1300 850 038 or visit www.rocketpropertygroup.com.au
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Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
