Property Investment Truths Experts Don’t Want You to Know
When it comes to property investing, what you don’t know can hurt you financially. We reveal some property investment truths experts don’t talk about.
If you own an investment property or two, you know that there’s more to it than simply buying and holding and never selling.
It’s not just buying a few property and waiting for it to double in value. No, there are many hard decisions and even harder work you need to do to succeed as an investor.
But of course, no one talks about them.
Instead of telling you that you that you need to spend many hours learning the ropes and researching, they’d tell you to just get a mentor or buyers agent to sort out the investment for you.
Instead of encouraging you to be rational and really think through your purchase, these experts would pressure you to make a decision quickly.
They tell you that all you need to do is trust the system and you’ll be fine.
Guess what? That’s where losses are made.
The truth is, these so-called experts are in the business to make money of you. Plain and simple. While some may not be outrightly lying, others are purposely glazing over what it takes to succeed.
Here are some truths that experts don’t want you to know when investing in property.
There’s no shortcut to property investing.
It takes time to understand the market. If you think you can just buy “off the shelf” and get rich, you’re kidding yourself and exposing your financial future.
You really need to understand why such a property is a good investment. What proof is there to show that it’s got potential?
Experts often push you to just “trust” their research as they’ve been doing it for a long time.
But remember, it’s your money. Make sure you fully understand what you’re buying. This means doing your rigorous due diligence. This takes time.
Don’t get pressured into an investment that you’re not sure about.
There’s no such thing as sure investment
If there is, all of us would be doing it. The truth is, no matter how much research you do or how reputable your mentor is, you can still get it wrong.
And don’t think that just because an area or property has been growing solidly over the long term means that you’re sure to make a profit. This is by no means an indication of a guaranteed growth in the future.
However, there are ways to reduce of buying a dud. This includes researching thoroughly and verifying every stats and claim made by experts.
It takes time for property values to grow
Generally, property values have doubled in value every 8 years or so. This is not the rule and this doesn’t happen to every market. Some markets will see faster growth, while others may take longer.
When investing in property, it’s important to realise that you need to hold your investment over the long term to make a profit. If you’re forced to sell prematurely, you could lose your investment.
Market dynamics could change for the worse
Just because an area is in high demand doesn’t mean that your property is always going to be tenanted. There are a number of things outside of your control that could impact your investment.
Just look at what happened to Perth. At the height of the mining boom around 2011, investors were racking up massive rents from FIFO who were willing to pay just about anything for a room. When the downturn hit, these same landlords found themselves struggling to get their properties rented.
Experts don’t often want to focus on what could go wrong, which is why you should. And make sure you factor this in your decision.
More isn’t always better
It makes for a good current affair story but buying 10, 20 or 100 properties isn’t always the best strategy.
But since your mentor or advisor is doing it, you may think you should do it too.
The truth is, you just need a handful of good quality properties that you can hold comfortably over the long term. This way, you can truly focus on boosting and extracting values from them rather than having 20 properties that you aren’t optimising.
It’s expensive to hold a property
A lot of experts focus on the buying and not what happens afterwards. But your ability to hold the property over the long term will determine whether you’ll succeed or not.
You need to factor in vacancies which are common as well as mortgage rate increases. There are maintenance issues you need to deal with even for new properties. If your cash flow falls short, you could be forced to sell at a loss.
Managing Editor of Property Market Insider and a former editor of Your Investment Property Magazine.
Published: 5 July, 2017.