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Five Myths That Kill Futures

Sue Irons uncovers the biggest myths that prevent investors’ success.

By: Sue Irons

31 March 2018

If you’ve been investing in houses you’re probably listening to advice you’ve come across and believe to be true.

Just because something is considered “common wisdom” that doesn’ necessarily mean that it’s entirely true. It may be only partly true, or it might be true only in certain circumstances.

There are many property investment concepts that have been commonly maintained as being true but are in reality myths.

Myth 1 - Houses Are Always Better Because of Land Content

Some parts of New Zealand are highly desired and, yes, the price of land is leading to increases in property value.

Remember, however, that not all land is equal. You won’t need to look too hard to find hundreds of thousands of hectares of land that won’t grow in value. Why? Because nobody wants to live there. Desirability plays a huge part in real estate growth. In fact, without it, you won’t see an increase in your property’s value. This is why your property research should be targeted towards those areas where people want to live.

Myth 2 - You Should Only Use Interest - Only Loans When Investing In Houses

Typically, an investor starting out, or someone with a negatively geared property will need cash flow the most, therefore they might opt for an interestonly loan to secure it.

Then, once they’ve owned the investment property for a time, they have the option of switching towards capital and interest to increase their equity in the property.

Bottom line, interest-only loans are a tool to be used with a well-planned property investment strategy.

Myth 3 - Only Wealthy People Can Afford To Invest

With the growth of property values across the main centres, this myth does appear to be true but, in reality, many individuals with incomes below $100,000 are investing in houses.

An online survey by LJ Hooker found that, of the 1700 households who responded, 37% have an income under $100,000.

Data also showed that 29% of those respondents had incomes between $100,000 and $150,000 and 34% make more than $150,000 per year.

Myth 4 - Property Always Goes Up in Value

Certain real estate cycles might make this myth seem to be true, but it’s not.

One quick look at the history of market values will show you that property values don’t always rise, sometimes they remain stagnant and at other times they even fall.

To mitigate any negative market changes, be sure that you’re investing in houses or units in a suburb with strong fundamentals.

Myth 5 - You Should Only Invest Near The CBD

Buying near the CBD is a great strategy, however, it’s not the only place to invest.

While areas close to the CBD do have a tendency to do well, in terms of capital growth, that doesn’t mean they’re the only areas with such potential.

Savvy investors look for property situated in areas where market drivers are strong, even if that takes them outside of the CBD.

So, how can you avoid getting caught up in property investing myths?

Education, of course, but not just any education.

Find successful property investors who are further down the road than you are and learn from their mistakes. Meet up with like-minded people who can give you good advice and keep you grounded in the truths about investing in property.

For more tips related to property investment, join us at our next property investor night and meet with our coaches. You’ll be able to ask them questions and it’s a free event. Book at: www. positiverealestate.co.nz/NZPI

Sue is the Head of Education and Director of Postive Real Estate (NZ) Ltd and also one of NZ's leading experts with a diverse knowledge of all aspects of property investing. Sue spent the last 15 + years immersed in the property market. Sue speaks at and runs many property events and has mentored many of New Zealand’s leading investors. Sue works with her investing clients to assist them to grow and enhance their portfolios, whilst keeping her eye on their end goal – financial freedom and choice. [email protected]

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