When it comes beginning your property investment journey, there are many fears that get in the way and stop people from proceeding. It’s not surprising though, given that besides your own home, this is likely to be the largest purchase you will make and it’s only natural to fear the worst as it’s a massive decision. Just remember, you are not alone.
To help you in overcoming your fears and gaining your confidence back to take that first step to financial freedom, we have put together the top 6 fears we hear from clients along with some helpful hints to overcome these obstacles once and for all.
1) Property losing value
Many people see this as one of the biggest fears, especially when the media talks about Australia being in a property bubble, and constantly telling us how the market will drop. The graph below shows us every time the media have predicted a property crash and hence why the media shouldn’t be believed all the time.
In saying that, you should still ensure you do the proper research and purchase investments in areas that have great amenities, government development and investment, that all help future sustainable growth through job creation.
When it comes to debt, many people see how hard it is to pay off their own home mortgage and can’t even fathom having another mortgage that is just as much, if not more, than their home. We completely understand and the first thing that you need to learn is the difference between good debt and bad debt. Bad debt is any mortgage that isn’t working for you. This includes things like credit cards, personal loans, car loans, and even your own home mortgage. While your own home is still working for you and making you money through capital growth, we still include it here as you can’t claim tax depreciation on this debt and as a result this means it is working against you from a cash flow point of view.
Good debt on the other hand is any debt that is working for you and allowing your money and assets to make you money. Debt on investment properties allow you to do exactly that, as you can claim tax depreciations and with the right strategy in place you can turn your debt into a cash flow positive investment.
3) Unable to afford mortgage repayments
Obviously this is linked to debt and many people believe that they cannot own an investment property without spending hundreds of dollars on mortgage repayments every week. The reason for this is purely down to education, as most people have only ever experienced one type of mortgage – being their home. As explained previously, these mortgages don’t work for you and with the right strategies in place you can actually make your mortgage work for you to bring extra cash into your pocket every week.
The key here is to educate yourself and get the help of professionals who live and breathe in the industry.
4) Ongoing costs being high
On top of your mortgage payments, you also have ongoing costs for insurance, management, maintenance, council rates and many more things that may pop up throughout the year. While your rent will cover most of this, you can still be several hundred dollars out of pocket every week.
This is where having the right structure setup and choosing the right property to invest in is key. With the right property and structure in place, you will be able to own an investment property that is cash flow positive after all costs. You can choose to put this extra cash back onto your own mortgage or if you are still worried about any unexpected costs, you can choose to keep the extra cash in an offset account that is there for when you need it.
Again, education is key here and having the right team around you who can setup the right strategies, and research where the best areas to invest in is the key to success.
5) No tenant
So we have the right strategy in place to ensure you aren’t losing money and are using debts to work for you, but what happens if we can’t get a tenant. This has to be the number 1 fear when it comes to investing and the answer is really quite simple. Do your research…
If you and your team have done the research you will know exactly what property is not only going to get future growth, but what property will find you high quality tenants. This comes from researching the area and understanding exactly what kind of property is suited for that specific area. If you are in an area that has a high family demographic, will you have a better chance in renting a 1 bedroom unit, or a 4 bedroom house?
This is something that is often overlooked, and we come across many who have picked great areas to invest in for future growth, but the property itself isn’t suited for that area. Now while this isn’t the end of the world, it does mean that you may spend a few extra weeks looking for high quality tenants which consequently means you won’t have any income from your investment during this time.
6) Fear of losing own home
The number one Aussie goal, is to pay off your home and own it outright. Now many people choose to do this the good ol’ fashioned way by working hard their entire life and slowly paying the mortgage down. The problem with this now days, is paying off a home in Sydney is going to take a lot longer than it did in the past. In many cases, people will get to retirement and still have a large mortgage that they need to pay off.
To overcome this fear, you must embrace the other strategies that you have put into place to overcome the other fears such as debt. By making your debt and your assets work for you, you will be able to generate enough capital in your investments every year to not only pay off your home mortgage but also have more to be able to retire comfortably on.
Now we don’t expect this article to magically remove all your fears, as we know we haven’t listed everything here. But what we have aimed to do is show you that through proper research and implementing the right strategies, property investing is something you should be excited about not scared of. You will be leveraging other people’s money (the bank’s) to help create your own wealth that will allow you to live your freedom years the way you want to.
If you have any questions or would like a free ‘Property Investment Analysis’ where we will educate you on the entire process and setup a strategy to suit your situation, then please fill in your contact details below.