According to Michael Yardney, author, property investor and wealth creator, there are eight “sure fire” ways of losing money in the property market, particularly in today’s economic climate. He believes that both investors and potential investors are being bombarded with get rich stories and they are losing sight of what an investment really means.
So let’s look at his top eight ways to lose money as an investor:
Purchasing off-the-plan one of the biggest hurdles is finance. Loans are generally only current for three months and so securing a formal “pre-approval” for an off-the-plan purchase is often impossible. Coupled with this is the uncertainty of completion dates and you have a recipe for disaster.
House and land packages these tend to be available in new or outer suburbs where there is less disposable income/less demand and a smaller choice of diverse tenants. The land is also worth less than half the purchase price.
Buying, renovating and selling once stamp duty, buying and selling fees and tax are taken into
account this is not a very attractive proposition in the short term. However, it is an excellent long term strategy.
Positive cash-flow properties not an easy way to become wealthy.
Options making a profit from property without ever owning it.
Rent guarantees the rent is guaranteed by the seller/developer for a certain period of time. These guarantees are actually built into the purchase price so what really happens is that the seller/developer gets the money upfront
from you for the rent that you will be paid over the next few years.
Regional properties generally capital cities outperform regional areas and city properties tend to have a higher rental growth and more tenants vying for the same property (although this is not always the case, with some regional areas actually outperforming their city counterparts).
Investing in mining towns – what goes up has to come down and when the mining boom slows down it will be very difficult to find a buyer for that great investment you once had.
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