subject: How To Overcoming Your Biggest Obstacles When Invest In Property [print this page] Think of interest rates as a switch that controls the economy. When the economy is doing very well, interest rates increase to slow it down. When the economy is not doing so well, interest rates decrease to stimulate the economy to grow.
When interest rates increase, property prices may stabilise, dropping just a little or going up slightly, depending on the location. In locations where there is high demand, the property market will still do very well because property prices are driven by supply and demand. These are the locations you should be targeting. When interest rates increase, more people rent. This, in turn, increases the rental value of the property. You won't see this immediately as you need to wait for your lease to finish, but then you can increase it. Also, when interest rates increase, it may cost you more to service the property but you can also get a bigger tax saving.
So, as an investor when interest rates increase, you can get higher rent and a bigger tax saving. If you invest in a high demand location - you win.
When interest rates decrease, more people buy and this drives the property price up. You win.
Property investment is a long term project of at least 10 years. During these 10 years, interest rates go up and down - it's part of the economy. As an investor however, you win whether interest rates increase or decrease. This is because historically property prices double in 7-10 years so, you win.
Another sound piece of advice is to have a financial buffer so that you're not living on bread and butter the whole time or that you have to sell your property. Personally, I have a 1.5 year cash buffer.
So, if interest rates go up to say 8% or 9%, I have enough money to cover my cost of living and still to live a comfortable lifestyle.
Obstacle #2: Fear of having no tenant
Recognise that property is a need. Everyone needs a place to live in, and so the demand is always there.
I never have a problem renting out my property. For example I own a house 22km from the city that is always rented out within a week despite others questioning who would rent a property so far from the city.
If you want your property to rent out quickly, purchase a property that is close to shopping centres, schools, public transport, the freeway, and is close to amenities and facilities.
Some locations may take 3 weeks to rent out, other locations where there is high demand for rental properties may only take a week.
Normally residential property takes about 2 - 4 weeks to be rented out. However, make sure you have a financial buffer to cover yourself if there is no tenant for up to 8 weeks. This will give you peace of mind when investing.
Obstacle #3: Fear of property prices going down
Historically, property prices in Australia have doubled every 7 to 10 years for the last 80 years. In 7-10 years, property has a cycle - it goes up, it stabilises, it may go down a little, and then it goes back up. In 7-10 years, it doubles, with a rise of, on average, 10% a year. So invest with the end in mind, it's for the long term. If prices go down a little, don't freak out, you won't lose money if you don't sell.
Do you know anyone who bought a property 5 or 10 years ago? How much did they purchase it for? How much is it worth today? I will bet they all went up in value.
When you invest, time works for you, and when you don't invest, time works against you.
Obstacle #4: Fear of job loss
If you were renting or owning a house and you lost your job, what would you do? You would need to find another job.
If you own an investment property and you lost your job, what would you do? You would find another job.
But if you own an investment property, you have a second option in that you could sell your investment property to give you some cash.
Have a financial buffer. If you lose your job, you will have money to live on until you find a job, so you don't have to stress out.
Obstacle #5: Confusion over what to do
You talk to family, to friends and to other people. You read the newspaper. Everyone is giving you different advice. You're confused; you don't know what to do. You're sick and tired of working hard and it's not getting you anywhere. You want to achieve financial security so you can live the lifestyle you dream about.
So what do you do?
Ask yourself this question: Are the people giving you the advice really qualified to help you? Do they themselves have the result that you want? If they haven't, how can they help you?
Think back to your dreams and to how you can start to realise them...
Seek the help of a property investment expert who has already achieved the result you want and ask them for advice.
None of these fears listed in this chapter should prevent you from investing in property. I would say your biggest fear should be of you turning 65 years old and realising you are on a pension of $240 a week. How would that make you feel? And then you look back and regret you didn't do anything about it. But by then, it's too late.
It's this fear that should drive you to investing in property.
