7 Misconceptions About Property Investment
Most individual would think that the trick to successful property investment is to study the time of market and buying them when they are at the bottom of the cycle. While there is another part of the group who thinks that you need to purchase residential properties that capitalize – this is one of the most crucial things. I mean, individuals who have such mindset may not always be wrong. However, they are buying into a property misconception more than a fact.
If you’re keen to grow money out of property, you must learn how to separate the misconception from the fact. And to assist you in making your first step, below are 7 of the most usual misconceptions studied:
Misconception 1: You do not need money to buy property
Fact: You NEED money to invest in property. However, that money may not need to be from your own pocket. When everything is taken into consideration, you should expect that every property investment – from the very start when you’re thinking to purchase a property, you need some money. Now… Let’s take it that you’re doing a ‘no money down deal’ that requires 0 cent for a deposit, you still require money for the 3A – Appraisals, Assessments and Attorneys.
As well as, practically every residential or commercial residentials require a little bit of extra effort when you first purchase it. Even the simplest of it all calls for a coat of paint, you need some money. So, even when you do not need to use your own money to get a property, you WILL certainly still need some money.
Nonetheless, this does not mean that anybody without spare cash under their name have no luck in getting a property to do investment at all. But that somebody will DEFINITELY need to put in more effort in sourcing out network for sponsors.
Misconception 2: In order not to jeopardize your investment, you need a company to purchase property
Fact: You will never know what to expect as every situation is different. Hence, the best way to safe guard yourself in property investment is to get a professional advice in determining what’s best for your case. In most occasion, a company is not required at the beginning. As a matter of fact, let’s suppose that you’re keen in getting a standard funding from a bank, there is still no assurance that you will be able to purchase a property in a company. There are, however, a few exceptions… But think about it, even when business owners who purchase property for their company (for e.g.: an attorney acquiring a property for his/her company), they will normally be called to guarantee the contract on their property personally.
In due course, although integrating might be considered valuable for tax / liability reasons, if you’re just starting out, a company will only serve as another obstacle that may potentially slow you down to the point of cessation. Hence, if you are just starting out, do not overcomplex your plan (such as high-priced points like companies) so much as to simply acquire a good deal for a property. You can constantly regenerate how you hold onto your properties along the way or even at a later part.
Misconception 3: Cash-flow is the essential
Fact: Cashflow is essential – However, prioritizing your property investment objectives and sourcing properties that aid you attaining your goals is the most crucial thing.
Concentrating exclusively on numbers can lead to purchasing problem properties that affect the attraction level of what a tenant may look for in a property – which will also lead to more work / effort needed to satisfy them. You will always need to put into consideration of what you intend to achieve, what is your contingency plan is, and if the property will live up to your expectation.
It is essential that you identify the steps accordingly:
- What you want (to achieve)?
- Which property can aid you in achieving your plan and expectation?
- Which property has the potential to hit your monthly favourable cashflow?
Misconception 4: Purchase the ugly accommodation at a good location
Fact: Occasionally, the landlord of that ugly accommodation assumes that their house deserves more than what it’s worth – just because the other comparable properties around the area are pricier than theirs. And that’s when you have found yourself a money pit – a property that you will constantly have to spend money on.
If you have your own contractor (a good one), and have the financial ability, then you have the knowledge on how to reconstruct the ugly accommodation into a property with eye-pleasing value added to it – and increase the possibility of sourcing more ugly accommodation at a good location. However, if you do not have that resources, just be prepared that it is going to take a lot longer for it to be worth due to the surrounding good accommodations. Remember… After all, it is still an ugly accommodation.
And, ugly accommodation does not bring in good tenants even when they have the perks of a good location. Thus, if you are not intending to reconstruct it, you will have a tough time gaining and keeping preferable tenants in that property.
Misconception 5: All property investment is a good investment
Fact: Abiding that properties bought in good locations generally have better investment rate, we hardly ever hear long-term investors claim, “I should have never purchased that property”. However, we do typically hear them proclaim “I should have never sold that property” or “I wished I purchased that property when I had the opportunity to”.
For many years, although landholdings have risen in worth nearly everywhere, if you purchase them in an area that is already in a declining rate or is dependent on one sector that is struggling to survive in the industry (for e.g.: timber, fishing, etc…), you are still putting yourself at risk. There are always chances where declining areas never improve.
Just like with stock investment, you can also make bad investment judgement in property. Not all property investment is a good investment – just like how not all blue-chip corporation is a good stock investment
Misconception 6: You need to time the market
Fact: Unless you can predict the future, you will never be able to predict how the market is going to be like. The truth is you will always have to source yourself a good deal. However, that does not mean you have to wait for the right time. As a matter of fact, waiting could be the worse thing to do in property. The earlier you purchase, the greater your chances of increasing your financial growth. Just try to ensure that you get yourself a good deal.
Your best choice is to concentrate on your purposes as well as discover a beneficial area of great leads for the future and purchase it right there and then. As long as you could hold onto it for at least 5 years or more, you are very much able to take on any downward turns of the market. If you have somebody supporting your mortgage, and/or costs you little to nothing every month, you do not have to time the market.
Misconception 7: Property Investment is Easy
Fact: While property investing is easy, it is not as simple as you think it to be. It takes work – A lot, a lot of work… And it takes effort to source for great properties. As soon as you gain the ownership of a property, it does end up being easier (to manage) along the way.
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