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Facts and Myths about Investing in Property

The biggest danger to creating wealth is misinformation.

Let me explain: Property millionaires are being created all the time in Australia.

What do I mean by property millionaires?

I mean people with $1,000,000 in equity. This is what’s left over after you take the value of your portfolio and subtract how much you owe on it. What’s left over is what you’re worth.

These new millionaires enjoy lifestyles most Australians only dream about. Yet they wonder why more people aren’t doing what they did. The reality is however, many Australians are still fearful of entering the market.

Actually I don’t blame them. They get advice from well-meaning family and friends. They get advice from workmates. And they follow the latest sensationalist articles in newspapers and on TV.

Problem is, they’re not getting advice from successful investors.

Without any ego, I can call myself a successful investor. I’ve personally closed over $1 billion in real estate deals in my career, and own a portfolio that means I could walk away from my company and travel the world any time I want. (Luckily enough I get to enjoy life and create my vision here at Investor Assist).

And I’ve personally helped create countless property millionaires here in WA and across Australia.

That’s why I wanted to dispel some common myths about property so you can make sensible decisions based on solid information, not myths and fear-mongering.

 

MYTH: Now is a bad time to invest in property.

FACT: It’s true that the Perth market has slowed recently and gone backwards in some areas. However this isn’t a threat.

It’s a massive opportunity.

You can now get set in a great suburb at a discount, and wait for prices to move again. Now prices have adjusted to the end of the mining boom other industries will start driving Perth forward, just like Melbourne and Sydney.

Oxford Economics confirm this, predicting Perth will join New York, LA, Beijing, Shanghai and London as one of the world’s biggest 50 contributors to economic growth.

Interestingly, Sydney and Melbourne did not make the list.

Some people have always believed ‘now’ is not a good time to invest as well.

This myth has been around since I started investing 20 years ago. Imagine if I’d listened to it! I’d have missed the chance to get into the Perth market, which I did back in 1993 when prices were just under $113,000 for an average house.

People back then were telling me I was mad, and that prices were too high and were about to plummet. Well-meaning family and friends practically begged me not to buy. People kept telling me I’d regret it.

Needless to say I didn’t pay attention. And now those houses are worth 4 and a half times more 20 years later.

So if they come back a few percentage points from time to time, do you think I really care? Of course not. It’s small-fry in the grand scheme of things.

Listen. The key to investing in property is to get in early. This way you’re one of the first investors to get in at the cheapest possible price. And enjoy massive capital gains as other investors push the price up.

And right now you can drive a bargain.

 

MYTH: Waiting until you’re ready is good advice

FACT: Every day you sit on the sidelines you’re going to watch prices and rents rise steadily. Right now the market has moved down a little, and you should jump in to get one (or more) of the bargains out there.

Odds are in 12 months you’ll kick yourself when you see how much capital growth you let go.

Now, I’m not saying to invest if it puts you in financial peril. Not at all. But if you’re financially ready then you should seriously consider jumping in. Waiting won’t make you money.

Let me ask you: What advice would you give yourself if you could travel back in time 10 years?

Most people would give their younger selves the winning lotto numbers.

You’d be better advising your younger self to buy property in good locations.

Because 10 years ago the median Perth price was $413,000. Now it’s $540,000!

Waiting might make us feel safe in our comfort zone, but nobody achieved anything great without pushing themselves. The only thing people get by staying within their limits is an “average” life.

 

MYTH: I’ll struggle to find a tenant

FACT: At the moment, vacancy rates are 4.4%. This means at any one time, out of 1,000 rental properties 44 are vacant. Even though this increased slightly over the last 12 months, it is still very low.

Given the end of the mining boom, it shows how resilient the market is.

And the REIWA reported a slight increase in rents in December 2015 – a good indicator of a stronger rental market.

Better still, whenever we secure investors with a property we make sure it is tenant friendly and ready. This way you’ll get even more applicants prepared to pay top dollar and you can choose the best tenant.

Plus, we have an in-house Property Manager who can do all of this for you.

Compare this to a low quality house where you take pot luck that your house will be looked after, and your rents even paid.

Don’t take my word for it though. Listen to what Peter and Claire Tait from Mount Helena said:

"Thank you for all of your help with Aveley. It has been a very positive experience. Yesterday I placed the ad on Gumtree and within 36 minutes I had a text from a young guy who was so keen to rent the place. I then got two more texts. Today I got another two emails and 10 minutes ago a phone call from a guy offering two weeks rent into my account right now and could he beat the young guy who's coming to meet us tomorrow. So basically, I could have pretty much rented 4-5 Aveley houses within 24 hours. Plus I got $390 a week."

So with more tenants than properties already and a strong economy making the rental market even tighter, Western Australia’s rents are sure to be strong for many years.

 

MYTH: Interest rates are pretty low. But won’t they go up and destroy the market?

FACT: Interest rates are very low right now, this is true. However interest rates move up and down between 5% and 10%, and have done for years.

This makes them almost background noise for smart investors; investors who always look for areas which give them value for money.

And as rents go up the impact of an interest rate rise is less and less.

Besides, there are advantages in getting in now because you can lock in low rates and sit back and laugh as rates go up.

As for destroying the market – the market has risen strongly over the past 20 years despite high and low interest rates. So no, the market might slow a little as rates rise but it’ll still rise and you can still make money.

My advice? Don’t worry about interest rate rises, and get into the market.

 

MYTH: We’re just going to sell you something

FACT: Our passion is to help everyday Australians get ahead using property. This means we don’t sell properties at seminars because we know the first step is education. The next step is to look at your financial and lifestyle goals and examine your current financial situation.

Only then are we ready to see if we can help you achieve the life you want through property. Our founding philosophy is about helping people, and if we throw all our heart and soul into this then everyone succeeds.

By the way, if we don’t believe you’re ready to invest right now then we’ll show you how you can get ready.

But we never suggest someone purchase an investment property if it’s not the right time for them.

 

MYTH: I can’t invest because I’ll go bankrupt if I lose my job

FACT: This is genuine risk to be taken into account, and one of the “what if” scenarios we’ll work through with you. This is why we won’t recommend you purchase if you don’t have the right financial buffers in place should something go wrong.

However, since most properties go close to paying for themselves the impact of job loss may be less than you think.

There are also plenty of insurance options to protect you against different scenarios.

 

MYTH: I’d love to invest in property but I can’t afford it.

FACT: You might be surprised how affordable an investment property is. Many people don’t have a deposit saved up, but don’t realise they can use equity in their own home as a deposit.

Or that they can use a smaller deposit if they pay mortgage insurance.

Another option is a family guarantee where equity from a family member’s house is used as security, or you can purchase as a joint venture with somebody else.

And if you’re worried it’ll cost you too much out of pocket then don’t forget:

  • The tenant pays most of it; 
  • The taxman pays a lot too – even letting you claim money back on your physical house if it’s new enough, and on the fittings as well, and;
  • You can look for investments where the rents are higher, meaning you’re not going to be out of pocket for one day. Even though these typically grow a little more conservatively they’re still an excellent investment choice because they’re still going up and not costing you a cent.