When it comes to buying property, the myths and legends about how to score the best deal are plentiful. They are passed on from one homeowner to the next and on and on, because nobody questions the popular consensus. However, many of the most common myths are exactly that and your belief in them may be ruining your chance to achieve your financial goals. So especially for you and the chance of a prosperous investment future, we’ve broken down the top 5 myths that just won’t die, but really should.
1. Property is the best and safest way to invest your money
It’s definitely true that real estate is a good way to invest your money, but whether it’s the best comes down to the individual and their long-term financial goals. The housing market can be unpredictable and really, the return you get on your investment depends entirely on the market, what you invest into the property and how well you maintain it under your ownership.
There is the advantage that if you have $100,000 you can invest it into property worth considerably more than that, however you may not see returns on that investment for a decade or more. As for the safety aspects, property is definitely not without risk! The housing market is a sensitive beast, affected by so many things – from interest rates to changes in government incentives, to global financial crises and so on. You need to understand your personal obligations – which are to keep informed, stay engaged and continuously manage your investment well – as well as your financial commitments to the property. Sometimes the upkeep alone can eat away at your profits. The great thing about property investment though, is that it provides you with one of the fundamental things every human being needs – a place to live!
2. You should buy the worst house in the best neighbourhood
Yes, location is important but the worst house in a neighbourhood has probably historically been the worst house for a reason. If the property is of a similar size and scale to other properties nearby and it seems like it can be renovated and upgraded to be on par with them, then this statement may in fact be true. However, if it is smaller, weirdly positioned on the block or has any strange characteristics contributing to its status, no amount of renovating will increase its value to the same level as the neighbours.
Take a good look at all the properties in the area – if the house in question has a distinct ‘one of these kids is doing his own thing’ vibe – then walk away. Prospective buyers in that neighbourhood will be looking for a specific kind of property – similar to the ones that are there in abundance. If the ‘worst house’ is too distinctly different from the others in its neighbourhood, it won’t appreciate at the same rate, purely due to its postcode – it has to be the kind of property that is in demand, in that area, by the buyers who are searching there.
3. You need a minimum deposit of 20% or more
First of all, it’s true that you need a deposit, secondly the more you put the down the better. A larger deposit reduces your overall mortgage and as a result, reduces the interest you will pay over the long term. However, if trying to save the 20% is the difference between you having a property or not, then you’re already behind the 8 ball, before you’ve even stepped into the game.
Nowadays it’s possible to secure a property with a smaller deposit, especially with more boutique style lenders providing finance to those investors who may not fit into the conventional ‘mum and dad investor’ mould. First time investors are thinking up creative ways to save their deposit and securing even 10% could get you on the way to realising your property investment dreams. The best approach is to do your research and discover what your options are – especially if you are a first home buyer or are eligible for specific government incentives.
4. It’s better to buy than rent
This comes straight out of the great Australian dream textbook. If what you want is to own a home then yes, it’s better for you to buy than rent. It’s 2018 though people!! We’re almost 2 decades into this millennium and let me tell you – priorities have changed. Lifestyle has become much more of a priority now than ever before. Rent is seen as an investment in a particular life stage or lifestyle, rather than a thing that people who can’t afford to buy do; consider that around 1 in 4 Australians don’t own a house and probably never will.
Millennials in particular have found it hard to get into the property market, especially with so many competing priorities, like education, travel and the general demands of modern-day consumption. The reality for many Australians is that the housing market has been largely inaccessible in recent years. Not only do they need to save a deposit for a property they may never find within their budget, they also need to accommodate for the current cost of living as well as financing other personal goals such as education, travel and family. Meanwhile, some investors are finding creative ways to combine the best of both worlds, with strategies such as rentvesting allowing them to achieve their investment goals and rent the lifestyle they want at the same time.
5. You can do just as well selling a property yourself than paying an agent
One of the greatest myths in real estate is that agent’s fees are too high and saving money by managing the sale yourself is a better option. This is only true if your goal is simply to sell your house and cut your losses. If the most you aspire to is to break even, then feel free to manage the process yourself, invest your own time with little or no return and enjoy your mediocre profits (if any), once the sale is finalised.
The whole reason real estate agents exist is to serve the needs of property investors. They will take care of details you won’t even have thought of, give you advice you never knew you needed and most of all, will wheel and deal their backsides off to make sure you get the best result possible. The type of sales campaign you launch will determine the type of buyer you attract and the ones with the big bucks are looking for high end glamour styling and photography, skilled negotiation options and professional interaction and support. Of course you can sell your property yourself if you like, but why on earth would you?
DISCLAIMER: The following advice is of a general nature only and intended as a broad guide. The advice should not be regarded as legal, financial or real estate advice. You should make your own inquiries and obtain independent professional advice tailored to your specific circumstances before making any legal, financial or real estate decisions.