If you’ve been investing in houses, you’re probably listening to advice you’ve come across and believe to be true.
But is it?
Just because something is considered “common wisdom”, that doesn’t necessarily mean that it’s entirely true. It may be only partly true or it might be true only in certain circumstances.
There are many property investment concepts that have been commonly maintained as being true… but in reality are only myths.
Following are five common property investment myths that stop people from investing in property:
Myth #1 – Houses are always better because of the land content
Some parts of New Zealand are highly desired and yes, the price of land is leading to increases in property value.
But you must remember: Not all land is the same. You won’t need to look too hard to find thousands of hectares of land in New Zealand that won’t grow in value.
Because nobody wants to live there!
Desirability plays a huge part of real estate growth. In fact, without it, you won’t see an increase in your property’s value. This is why your property research should be targeted towards those areas where people want to live.
Myth # 2 – You should only use interest only loans when investing in houses
Typically, a beginning investor or someone with a negatively geared property will need cash flow the most, therefore they might opt for an interest only loan to secure it.
Then, once they’ve owned the investment property for a time, they have the option of switching towards paying down the principal to increase their equity in the property.
Bottom line, interest only loans are a tool to be used in connection with a well-planned property investment strategy.
Myth # 3 – Only wealthy people can afford to invest
With the growth of property values all across New Zealand, this myth does appear to be true, but in reality, many individuals with incomes below $100,000 are investing in houses.
An online survey done by LJ Hooker found that of the 1700 households who responded, 37 percent have an income under $100,000 dollars.
Data also showed that 29 percent of those respondents had incomes between $100,000 and $150,000 and 34 percent making more than $150,000 per year.
Myth # 4 – Property always goes up in value
Certain real estate cycles might make this myth seem to be true, however it’s not.
One quick look at the history of market values will show you, without question, that property values don’t always rise… Sometimes they remain stagnant and at other times they even fall.
To mitigate any negative market changes, be sure that you’re always investing in houses or units in a suburb with strong fundamentals.
Myth #5 – You should only invest near the CBD
Buying near the CBD is a great strategy, however it’s not the only place to invest.
While areas close to the CBD do have a tendency to do well in terms of capital growth, that doesn’t mean they’re the only areas with such potential.
Savvy investors, depending upon their particular situation and goals, look for property situated in areas where market drivers are strong, even if that takes them outside of the CBD.
So, how can you avoid getting caught up in property investing myths?
Education, of course. But not just any education.
Find successful property investors who are further down the property investing road than you are and learn from their mistakes. Meet up with like-minded people to keep yourself grounded in the truths about investing in property and for a bit of encouragement when the going gets a bit rough or you just need some good advice.
If you’re after more tips related to Property Investment, you should join us at our next Property Investor Night and meet with our wonderful Coaches. You’ll be able to ask them any question you want and it’s a free event! Book your seat here.
Positive Real Estate NZ