As investors, it can be hard to separate the good property advice from the bad – and let’s be honest, there’s plenty of advice out there to sort through!
These are just some of the tidbits of bad advice I’ve heard over the years, which I strongly urge investors to ignore:
1. Buy locally, so you can visit the property
I understand the appeal of being able to drive by your investment to physically check on it from time to time.
But as a basis for an investing strategy?
This is just fraught with danger.
There are thousands of property markets within Australia, and they all have different drivers and growth cycles.
Invest based on the best investment location, not on your location.
2. Search for high yield opportunities
Gaining a strong cash flow is great as an investor.
But is it going to make you rich?
Not a chance.
Cash flow from a high-yield property investment may help you manage your investments, but you ultimately need growth to be able to build your net worth.
3. Invest in the United States – it’s so cheap!
It’s also risky, unproven, difficult to manage from afar and driven by completely different cycles and market fundamentals than Australian property. Steer clear!
4. Only invest in properties you would live in yourself
As an investor the goal is to take emotions out of the equation, by looking for properties that suit the market – not that you would like to live in yourself.
I have owned many well-performing properties that are consistently tenanted, but that I wouldn’t want to live in myself.
5. Invest to take advantage of tax deductions
You should never invest in a particular property simply due the tax benefits (such as depreciation).
You leave yourself exposed to the risk that the tax rules could change – and if the main thing your property has going for it is a tax advantage, you’ll be left with nothing but a poorly performing asset.
6. Buy a holiday home that you can personally benefit from
If you want to derive a personal benefit from your property, then invest wisely so you can grow your wealth and will eventually be able to holiday wherever you like!
Holiday home investments typically have low growth drivers and while they may give you a great spot to take a vacation every year, they won’t add to your wealth.
7. Buy off-the plan to access tomorrow’s property at today’s price
Look, I’m not a fan of buying off the plan in general.
It’s hard enough to forecast future values for three years down the track, but it’s downright risky to peg your finances (and tie up your investing capital) based on a “hope” for future growth.
Sticking with existing properties with known features and growth drivers is a smarter way to go.
This list is by no means exhaustive; I could almost fill a book with the amount of nonsense property tips I’ve heard over the year.
Ultimately it pays to remember: if it looks or sounds too good to be true, it probably is, so invest with your eyes wide open and a clear investing plan to guide your decisions.