The property market is filled with property investment myths. Property investment veterans know how to avoid the common misperceptions. It is the fresher investor or those who don’t have much exposure that may get a raw deal. Here are some of the most widely known and believed property myths debunked.
• The price of a property will always go up, so people are told and most people believe in that. The only thing that undergoes steady appreciation is the cost of the land, not the property. The value of the property depreciates over time. In some cases, the cost of the land may depreciate too if the local economic scenario is in a poor state. Recession, housing bubble, crash of real estate prices and lack of development in the area can easily wash away the appreciation of any property over the years. Investors will be compelled to sell the property at a lower price than what they had paid for it originally, even if it was ten years back. Things may not be so worse in most cases but having a belief that property prices will always appreciate over time is not wise. The important thing to keep in mind is to always have an eye on the macro and micro economic factors that may influence property values.
• People think it is easy to make money with investment properties or by developing properties. The industry is as risky as any other - if not more. Yes, there is money to be made but only the wisest make handsome returns. Many investors or aspiring property investors look for the next promising suburb, a boom market, wait for the right time or want very low interest rates. These may not happen and even if they do, they don’t guarantee great returns. The boom may subside, the lower rates of interest may not prevail long enough for an investor to flip the property for a profit, the promising suburb may forever remain promising and may not become what it was envisioned to be and the right time may never come. There are too many variables and uncertain factors here so generic tips or tricks are not relevant.
• Investors should look for various ways to make money. You don’t just sell to make money. You can use investment properties as rentals all your life and make more money. The best advice – Don’t go at it alone. Have an expert real estate agent, property manager and lawyer as you venture into property investments.
