{"id":1541,"date":"2022-01-18T09:20:56","date_gmt":"2022-01-18T09:20:56","guid":{"rendered":"https:\/\/royabhishek.in\/urbanbuyer\/9-reasons-why-you-shouldnt-buy-an-investment-property\/"},"modified":"2022-01-18T09:20:56","modified_gmt":"2022-01-18T09:20:56","slug":"9-reasons-why-you-shouldnt-buy-an-investment-property","status":"publish","type":"post","link":"https:\/\/royabhishek.in\/urbanbuyer\/9-reasons-why-you-shouldnt-buy-an-investment-property\/","title":{"rendered":"9 reasons why you shouldn\u2019t buy an investment property"},"content":{"rendered":"

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Are you looking to get into property investment, or maybe you\u2019re keen to add to your existing property portfolio?<\/strong><\/p>\n

It\u2019s that time of year when many Aussies are reevaluating their financial plans for 2022.<\/p>\n

Well, maybe you should buy an investment property\u2026\"house<\/p>\n

But maybe you shouldn\u2019t.<\/p>\n

Fact is, I\u2019ve spoken with hundreds and hundreds of investors in my time and I\u2019m often surprised when they tell me their reasons for investing in real estate.<\/p>\n

Many just get it wrong.<\/p>\n

You see\u2026while property investment is an excellent vehicle for growing lasting wealth, occasionally it\u2019s the wrong fit for particular people.<\/p>\n

In fact, sometimes, there are some very legitimate reasons why you just shouldn\u2019t do it.<\/p>\n

So you shouldn\u2019t buy an investment property if:<\/strong><\/p>\n

1. You\u2019re buying a property to pay less tax<\/span><\/h2>\n

Many na\u00efve investors think negative gearing<\/a> is an investment strategy.<\/p>\n

Their accountant tells them they need to save tax so they chase tax deductions or depreciation benefits and as a result, they often overpay for new or off-the-plan properties while ignoring the fundamentals of property investment.<\/p>\n

They think they need negatively gearing and get excited that for every dollar they lose they save 49 cent.<\/p>\n

Now that\u2019s crazy, especially as new stock almost always comes at a premium and has limited (if any) medium-term capital growth prospects.<\/p>\n

That\u2019s not the way to grow your wealth through property.<\/p>\n

Just to make things clear\u2026<\/strong><\/p>\n

A property is negatively geared <\/a>when the costs of owning it \u2013 interest on the loan, bank charges, maintenance, repairs, and depreciation \u2013 exceed the income it produces.<\/p>\n

In my mind this is not an investment strategy \u2013 it\u2019s a short-term funding strategy, which only makes sense when used to purchase high capital growth investment-grade properties.<\/p>\n

These tend to be established houses, townhouses, or apartments in desirable streets in top locations in the inner and middle-ring suburbs of our 3 big capital cities.<\/p>\n

2. You\u2019re buying because you\u2019re disappointed you\u2019ve missed the property price growth over the last year<\/span><\/h2>\n

Have you heard of F.O.MO? \u2013 the Fear Of Missing Out.<\/p>\n

It usually happens after a period of strong property price growth \u2013 you know when people read of the windfalls made by those who bought property a few years ago.<\/p>\n

However, that is obviously the time of the property cycle you need to be more cautious in your investing rather than over-optimistic.<\/p>\n

Of course, it\u2019s an understandable emotion, but investing with emotion leads to bad judgment.<\/p>\n

And it is exactly this type of emotion that makes you easy prey for the property marketers and spruikers who will offer you a way to get rich quickly. <\/p>\n

You just can\u2019t buy any property today and hope it will perform well.<\/p>\n

We\u2019re in for a 2-tier property market moving forward.<\/strong><\/p>\n

While most property markets around Australia have performed strongly so far this cycle (other than the inner city of high-rise apartment market), it\u2019s important to realise that moving forward we are likely to have a 2-tier property market.<\/p>\n

In other words, not all property markets will continue growing strongly moving forward.<\/p>\n

Properties located in the inner and middle-ring suburbs, particularly in gentrifying locations, will outperform cheaper properties in the outer suburbs.<\/p>\n

While the outer suburban and more affordable end of the markets have performed strongly so far, affordability is now becoming an issue as the locals have had minimum little wages growth of the time when property prices have boomed.<\/p>\n

In these locations, the residents don\u2019t have more money in their pay packet to pay the higher prices the properties are now achieving.<\/p>\n

More than that, Covid19 has adversely affected low-income earners to a greater extent than middle and high-income earners who are likely to recover their income back to pre-pandemic levels more quickly, while many have not been hit at all.<\/p>\n

Also, high-rise apartment towers in our CBDs, which were already suffering from the adverse publicity of structural problems prior to Covid19, will now become the slums of the future as they are shunned by homeowners and investors.<\/p>\n

And as we start to emerge from our Covid Cocoons there will be a flight to quality properties and an increased emphasis on livability.<\/p>\n

As their priorities change, some buyers will be willing to pay a little more for properties with \u201cpandemic appeal\u201d and a little more space and security, but it won\u2019t be just the property itself that will need to meet these newly evolved needs \u2013 a \u201cliveable\u201d location will play a big part too.<\/p>\n

To many, liveability will mean a combination of:<\/p>\n