Property investment can be a complex business, particularly if you are a beginner. Myths and misinformation can only complicate matters further, dissuading first time investors from making their first big move. Here are 9 myths to look out for.
- You Need to Be Rich
While it may be the case for private investors, for the most part, you don’t have to be wealthy to get a foothold on the property investment ladder. What is important is that you line up your investment goals with your current financial situation, and that you take the necessary precautions (establishing an emergency fund; paying off any outstanding debts) before going ahead.
- Waiting for the Right Time
The property market fluctuates naturally, so waiting for the right time isn’t necessarily helpful. Flexibility is a key investment skill to learn: it means that even when the conditions are less than optimal, you’ll have the resilience to adapt to the market depending on what you buy and where.
- It’s Difficult to Exit
Fluctuations in the market mean that inevitably, there will come a time where the market is strong, and while there’s no real “right time” to invest, it’s generally wise to sell while there is demand. Once you do so, you can exit.
- Too Much Risk
While some stocks (such as businesses) carry a relatively higher level of risk, the property market tends to be more stable than most, since it’s a tangible, long term investment people will always need.
- Buy to Let Is Cheaper
If the price of a property looks too good to be true, be careful. It may be an older property requiring a lot of upkeep, or in a less than desirable location, equating to lower rental yields, and lower demand. If “property flipping” is your goal, find somewhere requiring minimal renovation, as these costs could quickly add up.
- Oversaturated City Centres
The level of construction taking place in a city centre does not necessarily mean the area is over supplied with residential buildings: these may be commercial properties as well. It’s also worth noting supply and demand, which tends to remain high in major cities.
- Waiting for New Builds
Investing off-plan (before construction has been completed on a new building) can be worthwhile, as you may be able to buy at a discount before capital appreciation has the opportunity to accumulate, and receive equity once it’s built. The key takeaway here is to use a reputable developer to reduce risk.
- Purchasing Completed Properties Is More Profitable
The other side of the coin to off-plan investment is buying completed properties – however these may come with their own share of maintenance issues to take care of, such as outdated electricals or safety certificates.
- It’s Time Consuming
The level of time you have to spend on your property depends on the type of investment. It is possible to earn passive income through property investment, such as rental returns on properties where the “hands-on” tasks such as maintenance are outsourced to management and letting agents.
When you’re starting out in property investment, it’s important to stay informed, and to ensure the facts you have are reliable. With 30 years’ experience in the property sector, John Howard Property Consultant has a wealth of knowledge to share with seasoned and beginner investors alike.
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