It can sometimes be hard to sort the good advice from the bad when it comes to property investment, so we’ve done the hard work for you and summed up the not-so-hot tips to avoid.
- Buy locally, so you can visit the property
There is a certain appeal of being able to drive past your investment to physically eyeball it every now and then, but should its close proximity to you be the basis of your investment strategy? Such a foundation can be risky, it is wise to source the best investment location, not necessarily your location.
- Search for high yield opportunities
Gaining a strong cash flow is great as an investor, but it isn’t going to make you rich. Cash flow may help manage your investments, but ultimately high capital growth areas will build your net worth over time.
- Invest in the USA – it’s so cheap!
Yes, it may be cheap, but it’s also very risky. Not to mention it’s difficult to manage from afar and driven by completely different cycles and market fundamentals than Australian property. Unless you fully understand the ins and outs, probably best to steer clear.
- Only invest in properties you would live in yourself
As an investor the goal is to take emotions out of the picture by sourcing properties that suit the market, not that you would like to live in yourself.
- Invest to take advantage of tax deductions
You should never invest in a particular property simply due to tax benefits such as depreciation. If the tax rules were to change, this could mean that the main appeal of the property is no longer, leaving you with nothing more than a less-than-stellar performer. We recommend that you consult your accountant prior to any property purchases.
- 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 overall wealth position.
- Buy off-the plan to secure tomorrow’s property at today’s price
RUN AWAY NOW! 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. The age old expression still rings true – if it sounds too good to be true, it probably is, so keep this in mind when making your investment decisions.
For the latest investment tips, visit the blogs section of the Naked Real Estate website.