Property is one of the best forms of investments, so they say. Many people aspire to invest in property, and many achieve this aim. But is it all it's cracked up to be? Here are some home truths.
1. Property markets go through cycles. They rise and fall.
Properties generally rise in value over time, doubling in value roughly every 10 years (a complete property cycle), but within that property cycle, it is normal for the property's value to stabilise - or even decline - for a period of time. No property goes up all the time. An astute investor knows this and is willing and prepared to hold tight through the peaks and troughs. Property investing is a long-term strategy: all investors should aim to hold for at least one full property cycle. This tends to be the safest and less risky approach to property investing, although there are other strategies that work very well for some buyers.
2. Go with the (downward) flow
Sometimes, properties in great areas go down in value: it's just what the market does sometimes. Recognise the opportunity and buy! That great property will soon rise in value, and you've scored yourself a great home for less than what you might have paid at any otehr time.
3. No-one can ever predict what the market will do
Why are we all hooked on reading the latest market predictions? It's always fascinated me! No-one has a crystal ball. No-one knows. Take the time to learn solid property fundamentals: what drives growth, what features are attractive to people - study those well and make savvy decisions.
4. The most successful property investment is the most boring one.
A great investment property is boring. Nothing really happens. Some maintenance work, tenants come, tenants go, rent comes in, the property goes up over the long-term ... it's boring. If it's any more exciting than this, maybe it's not the best investment. Property is a set-and-forget investment option.
5. Be careful who you take your advice from
Data is easy to manipulate. Experts may not be so expert. And of course, no-one knows what is around the corner. Educate yourself, but ensure that the people you surround yourself with and the avenues you seek for advice are worthy of your attention and consideration. Property investment advice is an unregulated industry, and anyone can be a real estate expert.
6. Let debt be your friend
Many people don't understand the difference between good debt and bad debt. bad debt is that debt that we take on to secure a depreciating asset. A car is a depreciating asset. Don't take on debt to buy a car.
A property is an appreciating asset. That is a good debt to take on, because over time you will pay off the debt that you owe and end up with an asset that is worth substantially more than what you paid when you bought it. All homes go up over the course of a 30-year mortgage. Your car probably won't be around in 30 years' time.
Melissa Maimann is a licenced Buyer's Agent in Sydney. She assists home owners and investors alike with an affordable service that empowers you to make smart purchase decisions. Melissa's service is fast, efficient and accurate. If you need a hand with your next purchase, don't hesitate to make contact.