See through the misconceptions of property investment
Property investment is often seen as one of the safest and most lucrative ways to build wealth, but it’s also a space filled with misconceptions that can deter potential investors or lead them astray. From myths about needing to be wealthy to start, to false beliefs about always buying in your local area, many of these misunderstandings can prevent you from making informed decisions. By debunking these myths, you can approach property investment with greater confidence and a clearer strategy to achieve long-term success.
1. You need to be rich to start investing
Myth: Property investment is only for wealthy people.
Reality: Many people start with minimal savings and leverage financing options, such as home loans. If you have existing property, you may be able to borrow against the equity in that property to invest or perhaps even use the help of a guarantor to help get you started on your property investment journey.
Strategic planning and choosing affordable markets like Adelaide, where the median house price is $898,000 (just over half of Sydney’s $1,686,000), make property investment accessible.
2. Property always increases in value
Myth: Real estate prices only go up over time.
Reality: While property often appreciates in value over the long term, market conditions, location, and property type can lead to fluctuations. Research and timing are key.
Over the past year total returns for a median priced apartment in Perth were $178,788, compared with Melbourne at $11,718 (a similar median price). You would have been $167,070 better off investing in Perth than Melbourne, and that’s just in one year!
3. It’s best to pay off the mortgage quickly
Myth: Reducing debt as fast as possible is the best strategy.
Reality: For investors, it’s often smarter to use available cash to invest in additional properties, rather than rapidly paying down a single mortgage.
Investing in high-growth, high-yielding properties accelerates your wealth creation and weekly cashflow. This additional cashflow can then be used to pay down your mortgage, or invest in further properties. After seven to 10 years when the investment property has achieved significant growth, it can be sold, and the growth used to pay down or off your mortgage.
4. You should only buy close to where you live
Myth: Investing in your local area is safer and more profitable.
Reality: Some of the best opportunities might be in other cities or states, where capital growth and rental yields are higher.
In 2024, gross average rental returns for houses in Sydney was 2.7%, compared with Perth at 4%. Looking at capital growth, Sydney was 2.5%, compared to Perth’s 18.7%. Looking outside your backyard to other cities and markets can provide far superior returns.
5. Negative gearing is the only way to make money
Myth: You need to rely on negative gearing for tax benefits.
Reality: Positive cash flow properties can deliver ongoing income while still offering long-term growth.
Properties with positive cashflow increase your borrowing capacity, allowing you to continue to grow your property portfolio, pay down your mortgage or increase your cash buffer.
6. You can do it all on your own
Myth: You don’t need professional help; just rely on online resources.
Reality: Property investing involves legal, financial, and market complexities. A good team, such as property investment advisors, mortgage brokers, and buyers agents, can save you time and money and ensure you get the best returns from your investment.
7. Property investment is too risky
Myth: Property investment is like gambling.
Reality: While no investment is risk-free, property is generally more stable than other asset classes, like stocks, especially when backed by solid research and a long-term strategy.
You can minimise risk by engaging a team of trusted advisors, ensuring you have the correct insurances (landlords, building, life and income insurance), and a healthy cash buffer to cover any vacancy periods or unexpected events.
8. You need to wait for the perfect time
Myth: You should wait for the ‘perfect’ market conditions to buy.
Reality: Delaying purchasing a property is costing you in lost capital growth and opportunity. Doing your research, starting sooner and buying in a growing market allows you to benefit from compounding growth.
Purchasing a $500,000 property that appreciates by 10% per year is an additional $50,000 in capital growth alone in the first year, or close to $1,000 per week in additional wealth.
9. All property markets perform the same
Myth: Property prices move in the same direction across the country.
Reality: Markets are highly localised, and conditions in one city or suburb can differ significantly from another. Over the past year, the top three performing markets for house price growth were Perth (18.7%), Adelaide (12.5%) and Brisbane (10.2%). When compared with the bottom three markets Melbourne (-2.9%), Hobart (-0.5%) and Canberra (0.4%), it’s clear markets do not all perform the same.
10. Property management isn’t necessary
Myth: Managing the property yourself saves money.
Reality: Professional property managers can handle tenant screening, maintenance, and legal compliance, often leading to better returns and fewer headaches.
Property investment is not without its challenges, but it’s also not as daunting as many myths make it out to be. With the right knowledge, research, and professional guidance, you can cut through the misconceptions and make informed decisions that align with your financial goals. By understanding the realities of property investment and approaching it strategically, you can set yourself up for compounding growth and financial security.
Remember, successful property investing isn’t about luck – it’s about preparation, planning, and a willingness to see beyond the myths.
Richard Sheppard is the CEO and founder of inSynergy Property Wealth Advisory. inSynergy provides a broad range of professional services designed to assist with all aspects of property investment. Phone 1300 425 595 or visit insynergy.net.au