3 property investment myths, busted

Myth 1

Property investment is the quick way to build wealth

The property market has been steadily growing over the years, but that is no indicator of future growth. While many have benefitted from the rising prices, we all know that most seasoned investors have a flipside to share as well. The Guardian reports:

Investors have been taken by surprise by the 2.5% fall in the median price of houses in Sydney in the quarter ending December 2015. In fact, for the first time in years, the median price in Australia has declined by 0.4%.

The decision to invest in property must be well thought out and well researched. It is a good idea to check historical performance, but also important to check council development plans, population growth and availability of finance in the area. It may be a good idea to ask for a free property report from websites such as HashChing to know more about the area you intend to invest in.

Investing in property can definitely build your wealth, but only slowly. Be prepared for the slump when you decide to invest.

Myth 2

Investing in property saves tax

This is one of the worst reasons to invest in property. It is sensible to invest in a negatively geared property only if you are confident of the long-term capital returns. You are actually losing money on maintaining a property that is not giving you any returns, until it becomes positively geared or you sell it. Don’t forget to count the duties and taxes when you sell the property as well!

Negative gearing is not an investment strategy but, if employed wisely, can lead to positive cash flow. However, if your property cannot earn enough to pay off your loan, is there a guarantee that it would show significant capital growth to make good your losses?

Myth 3

Renovation adds value to your house

Well, this one is true, but only partially.

Undoubtedly, renovation can make your house look great, but that doesn’t mean it will guarantee you a higher selling price.

Of course it makes sense to renovate your kitchen or bathrooms to a level comparable to other houses selling in the neighbourhood, but a $20,000 bathtub may not really help your cause. Sometimes, it isn’t necessary to spend money, but being creative can add much more value to your house—think about a unique seated area in a well manicured lawn.

As it can be hard to judge what renovations would pay off or not, it is wise to consult a property agent before breaking your head over moving those walls.