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1

April

2016

5 investment tips to ignore

1. If it sounds too good to be true it probably is! Many investment companies quote unrealistic rental prices that cannot be achieved in the current market. The typical guaranteed rental return is a classic. Avoid this like the plague. The price to cover this guarantee is built into the sale price which at the end of the day you pay for. Off the plan units are also a very risky proposition considering you are gambling on the market state in the future once it is built.

2. Articles promoting cheap housing from overseas are truly the ones to steer clear from. As well as too good to be true, markets in other countries are usually driven by different fundamentals. On top of this there is the problem of managing and trusting the investment from afar.

3. Invest in a holiday home! Whilst many people do this, it is not a way to make a lot of money. The fundamentals of property investment have to be followed and whilst a holiday home might give you a few weeks of accommodation every year, they usually do not produce the capital growth that other properties generate. Holiday rentals also have a higher cost associated with management fees as well as the costs associated with higher wear and tear.


4. Properties promoting positive cash flow. Buyer beware!  Whilst it may be true that a small percentage of properties, usually units can have a positive cash flow, they will not generally be high performing properties. An investor's wealth ultimately comes from the capital growth that the property produces over a number of years.  Cash flow properties rarely increase the same way, so if the property does not increase in value, it is very hard to repeat the process to buy another.

5. Personalizing your decisions when buying an investment property. One needs to take the emotion out of investing in property. You do not have to live in the property yourself, so don't buy one on that premise. The fundamentals of a purchase should always be followed. Buy in a reasonable location that promises growth. Buy a property that renters want to live in and then weigh up those two points against the immediate return and the long term capital growth of the property. Of course, remember to always have it managed by a reputable and trustworthy property management company.

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