Property investment myths

There is loads of information on property investing, most of which is just fiction. Some facts have been watered down or entirely wiped out by the myths peddled by less sophisticated investors. This has made it difficult to discern truth from falsehood, recklessly leaving budding investors short-handed. Misinformation has led many investors astray and is killing many property portfolios.

The same could be happening to you. You could be working on wrong information and you wouldn’t know until it’s too late. To help you recognize this predicament before it befalls you, we enjoin you to take a look at the five most insidious property investment myths.


Myth1: All Properties Rise in Value

The first and probably the biggest myth out there is the belief that all property goes up in value. This is not so. There are a number of factors that influence the value of a property that have nothing to do with the general market. Factors such as amenities, location, and type of property are intrinsic to each property and always contribute to its value. And so there’s no justification to buying a property simply because you’ve been told that it’ll rise in value invariably.

Depending on what you pay at the time of purchase and other factors, the property’s value may or may not rise. If you want to find an undervalued property with great intrinsic value that’s likely grow significantly, you have to do your due diligence.  


Myth2: Property Investing is only for the Wealthy

You might be surprised at how flexible property investing is when it comes to how much money you need to start. You don’t have to be wealthy to engage in it. In fact, there are many ways through which you can invest in property that involve very little cash that a “normal salaried person” can handle.

One way is by using the equity in your existing home. Many people don’t realize that, but the equity in their current homes can be leveraged to secure a deposit for an investment property. You can also use your hard earned savings.

Other ways that are cost effective and don’t require you to be wealthy include buying off-the-plan property, starting a joint venture, or using property investment agreements. All these ways make it possible to invest in property with little capital.  


Myth3: Only Invest in or around the Central Business Districts

When you’re learning how to invest in property, the first thing you’re told is to always consider the location of a property before anything else. Proximity to amenities, transportation infrastructure and social services is important. So we tend to arrive to the consensus that the best places to invest are around the central business districts, after all that’s where most of these services are located and the growth potential is significant.

This is true to a certain extent but not entirely. Properties around central business districts aren’t the only ones that grow in value, nor are they always guaranteed to do so. Factors that enhance value growth are in play outside the cities as well and so if you narrow your focus to only within the cities, you’re likely to miss out on some excellent investment opportunities elsewhere, especially in the regions and outer suburbs.

Properties around central business districts aren’t the only ones that grow in value, nor are they always guaranteed to do so.

 Myth4: Only invest in familiar locations

There’s nothing wrong with investing in your neighbourhood, a place that you’re most familiar with. In fact it is advisable if you’re a newbie. The problem is when you become a stickler for it.

It is highly likely that properties with far better fundamentals are located in areas that you’re unfamiliar with. All you have to do is step out and search.  Do your due diligence on all areas that interest you, starting with fundamental factors of each one. Start with factors such as rental yields, new infrastructure, historic capital growth trends, vacancy rates, demographic data, stage of the property cycle, etc.

That sense of security that you feel by buying locally may not last once you realize that you’re missing out on opportunities that could help you reach your investment goals quicker.  


Myth5: Investing in Property is a quick way to get rich

“It’s safe as houses” – ever heard of this statement? It’s something people say to make comparisons with the relative safety in investing in houses. As it turns out this is not as true as they like to think. The property market is just like any other market. It has its own forces like all the others, and plays according to them. And it sure as hell is not a quick way to get rich.

If you decide to invest in property, your end goals ought to be at the forefront. If you want to make wealth, then it’s pertinent you get used to the idea that it’ll probably take you more than 10-20 years to realize your goal. The decision should be well thought out and well researched. Market forces, such as historical performance, area development plans, population growth and availability of finance should align with your investment goals.

There are scenarios where it takes a shorter period. Such as when you invest in the right house and land in a good social suburb, you will do well in a short period of time. Otherwise real estate is a long term game. All you can do is try to look for the best potential parameters that can give you the maximum potential returns in the shortest time possible.