The E-Fishient Property Solutions team came across something last week while we were scanning the news. A research survey conducted by State Custodians lenders, found that Australians are really quite apprehensive when it comes to property investment. For a country where bricks and mortar is still paramount when it comes to wealth generation this is a little alarming.
Specifically, the study identified these key statistics:
- 65% of Australians are anxious about whether property investment is viable
- 35% of Australians felt it was too hard to come up with enough money for a deposit
- 33% of Australians are worried about taking on too much debt
- 23% of Australians believe it’s too expensive to find an investment property where they live
While we completely understand that the somewhat unstable economic climate and disparity between wage growth and cost of living is making things difficult, it’s not impossible. And more importantly, the fears that we have as Australians shouldn’t really exist. Why?
Because there are plenty of reasons to not be scared of property investment. So let’s bust these myths.
Myth #1: Property investment isn’t viable
Property Investment is viable. If you invest smartly. By seeking out opportunities that are cash flow positive, you make money on your investment and can use it as a second income stream to pay down a mortgage, reinvest or spend as you would like. There are a number of things to look for when identifying a property with the potential to be cash flow positive; good infrastructure, an area with good projected population growth and health projected rental yield growth.
Myth #2: Saving for a deposit is too hard
We heard Bernard Salt talk about foregoing the avocado breakfasts in favour of a savings account and it’s true. By giving up a little now, homeownership becomes a very real prospect. Save $100 for one year and put that into a term deposit with a fixed rate. At the end of each term, add whatever else you have in savings to the deposit and lock it in for another period. You’ll have your deposit within a couple of years. Or, take advantage of the first home buyers grant. Although it has just decreased, it is still a big contribution and if you start small in the world of property, you can sell and buy bigger when you’re ready.
Myth #3: You will take on too much debt
To understand why this is a myth, you have to understand the two types of debt; good and bad. Good debt is a way to build wealth over time. It is debt that will decrease over time as you create wealth and ownership of something else. Bad debt is debt that diminished your wealth over time and is not tied to any kind of asset. Because of this, home loans and investment loans are classified as good debt. As long as your debt is manageable and you forecast your income against paying off the mortgage, investment debt is safe and shouldn’t cause you any major issues.
Myth #4: Finding a property where you live is difficult
This one makes us laugh a little. Why do you need to be close to the property? You aren’t living in it, it’s an investment. There are property managers available equipped with the tools and know how to manage the property for you and communication is as simple as picking up the phone or sending an email. The truth is that the areas where the majority of middle aged Australians currently live in their first home are not where the investment market is strong. But that shouldn’t be a deterrent. You just need to find people you can trust and feel safe working with to help you along the way. Distance is no longer a boundary to business in Australia and it shouldn’t be to wealth creation either.
So there you have it. Four very real Australian property myths busted!
Please note that this advice is intended for general information and is not intended as financial advice. You should contact your trusted financial advisor or mortgage broker before making any decisions. If you have any questions please contact our team.