Property investing can be a great way to build wealth. Not only can you derive income from your properties, but over time, capital growth means you’re holding an asset that will ideally be worth more than you originally paid for it when it comes time to sell. Despite all the information available to people interested or already invested in property, common myths remain. Keep reading below for some misconceptions about property investing and how they can be busted.
Property investing is only for wealthy people
Obviously, having some capital available to provide a decent-sized deposit and optimise your loan-to-value ratio is ideal. This is the case whether you’re investing or buying a primary residence. But it’s important to remember that you don’t need hordes of money to invest in property. Most Australian property investors own one or a small number of properties. These “mum and dad investors” often use the capital they have sitting idle, or some may even refinance their mortgage and use the equity in their family home to fund the purchase of an investment property. It’s possible to invest in property even if you don’t have lots of wealth behind you.
You should only buy in familiar locations
A common myth in property investing is that you should only buy in areas you know. While the area you buy in should meet your specific investment criteria and have some of the key things residents look for in an area – proximity to the CBD, access to public transport, infrastructure growth, good schools, and local amenities such as shops and cafes. These things exist in many suburbs, so it’s worth doing your research to see if perhaps there are other areas interstate that may suit what you’re looking for in an investment.
Claiming depreciation raises the property’s cost base
Property investment, like other investment options, is often a long-term strategy. Therefore, it’s important that you take advantage of things like claiming deductions for depreciation and other expenses throughout the time that you hold your investment property. There isn’t always a guarantee that your property’s capital growth will be positive when it comes time to sell, so you should claim deductions to optimise your cash flow while you have the property.
Owning investment properties takes a lot of research, planning and commitment to a long time horizon in most cases. Keep these myths in mind when it comes time to buying or selling your investment properties, and always make sure you seek advice from qualified legal and financial professionals. Tailored advice is critical as you need to make decisions that are best for your unique situations and long-term goals.
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Remember, this article is general in nature and is not financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.