As a new property investor, there are a lot of myths and misconceptions that you will need to navigate through. Some of these will be about what being an investor means and the type of people who get into property. Others will be about the best ways to invest and the types of properties you should be targeting or avoiding.
Here we cover the most common property investor misconceptions we regularly come across. As part of this, we will explore where these perceptions have come from and share our advice on overcoming them.
Common misconceptions about property investors
Property investors are generally spoken about in a very specific, and often not very flattering, way. This has led many non-investors to hold an unjustifiably harsh view of those that do invest in property. This includes incorrectly believing that:
- All property investors are rich: Many people believe that, to get into property investing, you need to have already amassed a lot of wealth. There is also a stereotype of a successful investor living comfortably off the income generated by multiple properties. However, in reality, the average investor earns less than $100,000 a year and only owns one or two properties.
- Property investing is easy: Many non-investors also believe that property investing is a straightforward process and strong returns are almost guaranteed. As such, all you really need to succeed in property is the money to buy your first investment. But, as every experienced investor knows, property is risky, and success takes careful planning and a lot of research.
- Investors only care about making money: Building on the two previous points, some people see property investors as greedy and only focused on profits. They believe their key priority is their financial returns and will always look for ways to increase their income. However, most investors understand the real value of a good tenant and will actively work to keep them in place.
Common misconceptions held by property investors
Many investors also hold inaccurate views about the property investment process and the ideal investment approach. This includes believing that:
- A property should double in value every decade: Conventional investing wisdom suggests that time is the key to achieving significant returns from your investment properties. While there is some truth to this, there are no guarantees in property investing – particularly regarding your returns. As such, factors like local market performance and anticipated growth must be considered when picking an investment property.
- You have to choose between rental income and capital growth: Depending on your financial situation and investment goals, you may choose to focus on maximising either income or growth. However, this does not mean that you cannot get both of these types of returns from the one property. It also does not mean that every property in your portfolio has to deliver the same type of returns.
- There is an optimal time to buy: Despite what many investors – particularly those just starting out – believe, there is no perfect time to buy an investment property. Similarly, it is almost impossible to time the sale of your property to achieve the absolute maximum price. And attempting to get the timing just right will usually mean a lot of waiting, which will slow your portfolio growth.
- You only make a loss when you sell for a loss: Some investors believe that short-term losses are OK, so long as the property makes gains over the long term. As such, they will be willing to buy or hold underperforming properties, if they believe they will eventually achieve growth. However, this overlooks the impact short-term losses have on your immediate financial situation and ability to build your portfolio.
Want to discuss this further?
If you would like more information on the realities of property investing, give the Search Party Property team a call. We have learnt a lot over our 20+ years in the industry and are always happy to share our advice and insight. We are also experts in helping investors to build high performing portfolios and secure their financial future through property.