Newspaper article Daily News (Warwick, Australia)

Why Investing in Real Estate Is Not like Home Buying

Newspaper article Daily News (Warwick, Australia)

Why Investing in Real Estate Is Not like Home Buying

Article excerpt

BUYING property is almost a rite of passage in life's journey for Australians. And the very first property purchase is usually a home.

Down the ages, generations of 20-and 30-somethings reach a stage where they tire of the vagaries of the rental merry-go-round such as restrictions on decorating, owning a pet, and the inherent insecurity of year-to-year leases.

Understandably, many long-term renters crave ownership of their own.

That first home purchase represents the scaling of an enormous learning curve. We grapple with estate agents, mortgage brokers and banks.

There are many months and even years scrimping to save a deposit and endless open for inspections.

There's usually a fair bit of disappointment along the way, as expectations are scaled down to reflect a budget's limitations and the pain of being outbid on the dream home, often repeatedly.

So you might assume that the home-buying veteran is sufficiently battle-hardened and clued-up to fearlessly buy an investment property.

Critical differences

The reality is, investing in real estate is a vastly different affair to buying a home.

When you buy a home, you look for a property with the accommodation you need, in an area that you want to live in, within your budget.

When buying a home, the only opinion that matters about its features, location or accommodation is your own.

For an investment property, the equation is exactly the opposite.

Property investment is about finding a property in high demand and short supply that will go up in value substantially over a period of time.

The only views that matter when assessing an investment property's potential, features, location or accommodation is that of the market place, both now and in the future.

It's this balance of market opinion and underlying demand which ultimately determines its investment performance, both in terms of income and capital growth.

The smart investor never allows personal likes and dislikes to cloud their rational investment judgement.

Questions you need to ask

So before you start looking at properties, take my purpose test by asking yourself these four questions:

Why am I buying property? …

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