The 12 myths of property investment: Part 3

Information provided by InReach Investments

There are many myths surrounding what it takes to become a successful property investor.  I'll be giving you my perspective of the 12 key myths that are currently in the marketplace over the coming weeks. To learn more about me, Cameron Patterson, go to www.inreachinvestments.com.au.

To read my previous post covering myths 1 - 4, click here, or here for myths 5 - 8. 

Myth 9: Investors should always negative gear
 
Every investor has a different starting point different goals and a different risk profile. Therefore investors should choose an investment strategy inline with their goals and risk profile.
 
My strategy is to buy neutrally/positively geared. And I find that this approach allows me to ;
  • Accumulate properties that make money from day 1 and they don’t eat into my personal cash flow.
  • Own a portfolio that is at less risk if I lose my job (the properties all look after themselves.
  • Grow my portfolio more easily (easier to accumulate a deposit for the next one and also to meet lending criteria with most banks).
The neural/positively-geared strategy is one that successful investors with large portfolios more commonly use.
 
Myth 10: You should buy something you want to live in.
 
Investors should be targeting properties that meet their investment strategy and their long terms investment goals. The end result should always be to maximize profit in the most risk adverse way.
With these goals in mind if we allow our own personal biases to influence our decision we may not achieve the best results.
 
For example. a potential investment property may meet all of your investment criteria however you may not like the fact that it has a peach bathroom. Supporting data suggests a 1% vacancy rate in area and the potential investment is currently rented out at a rate inline with a local comparable (in comparable condition). Local estate agents have confirmed there are no issues with tenancy.
 
As an investor in this scenario, I don’t believe there is any increased risk of having the peach bathroom. I am not the one that has to live in it and the supporting data and my due diligence confirms this. Note. if a minor renovation was to be conducted, it maybe possible to achieve a higher rent.
 
Myth 11: You should invest in houses not units
 
I believe there are many benefits of buying units over houses:
  • Yields tend to be higher with units and apartments therefore making them a better return on investment.
  • Vacancy rates can be often be lower in units and apartments therefore making it easier to rent. As an investor, this lower vacancy rate lowers your risk of exposure to having an untenanted property.
  • Strata management can relieve the investor of minor maintenance and major structural issues (of course you are required to pay strata fees).
  • Lower purchase/entry price of units and apartments make them more obtainable if you are struggling to get into the property market
Myth 12 : You must buy brand new to obtain tax savings
 
This is a blatant myth.  What is true is that newer properties, generally have greater tax savings in the form of depreciation ie. a brand new properties will have the maximum saving/depreciation.
 
Depreciation on a property lasts for 40 years and purchasing a property less than 7 or 8 years old still provides excellent depreciation.
 
Often a better investment can be found in existing residences but investors should take all investment fundamentals into account.

Keeping checking this space for more monthly myth’s from InReach Investments.

Cameron Patterson, founder of InReach Investments, began his career in pharmaceuticals but found his true calling within the property market. After taking the leap of faith to purchase his first investment property, Cameron’s success has snowballed. To learn more about Cameron and his mentoring and property services, visit www.inreachinvestments.com.au






Disclaimer: information supplied by InReach Investments. While due care is taken, the viewpoints expressed by contributors and/or sponsors do not necessarily reflect the opinions of Your Investment Property.

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