Let’s look at some of the property investing myths that hold people back from investing in property.
1. You Need to Buy Your Own Home First
This is a massive impediment for prospective property investors. They believe that just because they don’t own their own home, that they can’t begin investing in other properties to make a profit.This is a property investing myth!
I have met countless people who said they are waiting for the home to be paid off before looking at any type of property investing in Melbourne.
This is crazy because their homes are costing them money and the longer they wait to invest in property the higher the price they will be paying. Secondly, they are losing out on one of the biggest assets they have and that is time in the market. Every day you wait is costing you money!
A lot of people these days rent the home they live in. Why? Because buying a house to live in is taking money out of your pocket that you could be investing elsewhere. When considering your position as an investor, you need to start thinking about things around you as assets, and your own home isn’t an asset because it’s not making you any money.
Start by investing in other properties first; then you’re better placed to generate an income and move on-wards from there.
Younger first home buyers quiet often live in the home as the principle place of residence for 1-2 years before moving out and renting the place as an investment and claiming all the benefits associated with it.
It really comes down to a matter of choice.
2. Only the rich can afford to invest
With the growth of property values all across Australia, this myth does appear to be true, but in reality, many individuals with incomes below $100,000 are investing in houses. I’ve known school teachers, nurses etc who are not on the higher income scale yet have been able to purchase multiple property investments.
An online survey done by LJ Hooker found that of the 1700 households who responded, 37 percent have an income under $100,000.
Data also showed that 29 percent of those respondents had incomes between $100,000 and $150,000 and 34 percent making more than $150,000 per year.
Purchasing a house on a full block certainly would cost a lot, but you can start with much smaller investments, such as townhouses, units, and apartments.
When you start earning income from these investments, you’ll have more money to finance others. On top of that, if you pick the right asset at the right location at the right time, the property would appreciate in a few years which translates to more equity to fund your next purchase.
If you are just getting started, you can benefit from the equity in your home. If you have significant equity and have made timely payments, you may be eligible for a loan to build a new house or apartment purchase. Owning another asset may provide a tax advantage, thus extra cash, as well.
Some people think only the very wealthy can afford to buy an investment property. The problem is most people do not understand the difference between home loan debt and investment debt?
While it’s true that you should enter into investment with a financially responsible lens, some are choosing to purchase an investment property as their first property, and people on ‘ordinary’ incomes are finding they can take a step into investment by leveraging the equity in their existing home, or with savings they’ve worked hard to put away.
Although you do need to be in an excellent financial position to take out a home loan, you do not have to be rich. People on average incomes and even first home buyers are finding that they can save and purchase an investment property.
Ready to take the next step?