I’m in my 20s, and I have a good job. My parents are encouraging me to buy an investment property. I get that I should invest my money in something, but I don’t know much about real estate (or investing for that matter), and the idea of taking out a mortgage does make me nervous. My parents bought property back in the 1990s so they think you can’t go wrong with property, but I worry that I won’t be able to take advantage of the same market conditions they had. Is an investment property the right move?
My view tends to be that an investment property isn’t the best place to start for most beginner investors. If you’re new to investing, jumping into a multiple six-figure asset is like jumping into the deep-end of a pool without knowing how to swim.
Property investment is not for the faint of heart.Credit: Simon Letch
I’m not saying property isn’t, or can’t be, a good investment. It can be – if you know how to buy the right property, for the right reasons, at the right time. In other words, do you know how to make an informed property decision – or are you just hoping it’ll work out well for you?
If you’re sitting in the second category – that’s understandable. There are a lot of accidental real-estate millionaires in Australia. It’s easy to think maybe you can win that lottery as well – just buy a property, wait a few decades, and you’ll be rich too.
It’s also easy for those who rode the property boom to have a false sense of confidence, thinking they know more about property than they actually do. Many well-meaning parents push their adult children into investment properties assuming it will be a safe or good investment.
However, it’s more complicated than just buying and sitting on a property. Believe it or not, you can lose money on property – you don’t hear those stories as much because (as with any investment, not just property) it’s harder for people to talk about their losses than their wins.
If you want to minimise the risk of making a move you’ll regret, this is work worth doing.
There are plenty of ways to lose money on property – buy an over-valued property, buy in a location that ends up having little growth, underestimate maintenance costs, be forced to sell at a loss if an unforeseen event means you can no longer afford mortgage payments, and so on.
So, the question isn’t so much – “Should I buy an investment property?” but “Is the journey of property investing for me?” Here are some questions that will help you start to answer that.