14 Reasons You Shouldn’t Invest In Property

[youtube id="4Sscq7Mq7wA" align="left" mode="lazyload" maxwidth="500"] There are a lot of reasons you should invest in property but it isn't for everyone. Here are 14 reasons you shouldn't invest in property. There are a lot of reasons you should invest in property, like being able to leverage your money, get capital growth, get passive income in the form of positive cash flow. But there's also a lot of reasons you shouldn't invest in property. Here's 14 reasons why you shouldn't invest in property. Hey, I'm Ryan from onproperty.com.au, helping you find positive cash flow property. Believe it or not, property isn't for everyone. And there's a lot of reasons why you may or may not want to invest in property. I'm going to go through 14 different reasons you shouldn't invest in property. 5 of which are personal reasons. And then, 11 of which are investment reasons. So let's go through the personal reasons first why you shouldn't invest in property. The first personal reason you shouldn't invest in property is you don't have the money. It's a lot more expensive to go ahead and invest in property than it is to invest in something like shares. Shares, you can potentially start investing for as little as $500 or $1,000 to start your share portfolio. When purchasing a property, you're going to need at least a 5% deposit. Plus, you're going to need to cover a bunch of costs. So, maybe around 10% of the purchase price. If you're looking at a $300,000 property, you're looking at $30,000 as a minimum to get into the market. So, if you don't have a deposit, if you don't have the money to invest in property, it's going to be very difficult and you may not want to invest in property. You might want to pursue something else until you do have enough money. The second reason you should invest in property is that you can't get a loan. Now, if you can't get a loan for a property, it's going to be very hard to purchase one. Properties are extremely expensive. We're talking $300,000, $400,000, $1 Million. A lot of us don't have that sort of money in the sock, under our pillow. We would need to borrow money from the bank in order to get that. Now, if you don't have a steady income, if you're not full time or part time, if you don't have a business where you can show at least the last 2 financial years in terms of what you earn and you earn a decent wage, then it's going to be very difficult to get a loan. If you can't get a loan, you probably can't purchase a property. So I recommend going ahead, speaking to a mortgage broker first to find out whether or not you can invest in property, whether or not you can actually get a loan. Because if you can't get a loan, you’re probably not going to be able to buy a property. The third reason you shouldn't invest in property for personal reasons is you don't know much about property. You just talked about it with your friends over a barbecue or you saw the Melbourne and the Sydney market boom and people make $100,000 or $200,000 seemingly overnight. And you think, "You know what, I want to get myself a little bit of that action. I wouldn't mind $100,000 in 12 months in terms of capital growth on my property. I'm just going to jump in and buy something." But if you don't know much about property, you don't know about the process. You don't know how to research an area. You don't know about mortgages and all of this sort of stuff. Then, you may want to hold for a little bit. Start doing some education. Start reading up on these sorts of things to get an idea of the property market before you go ahead and invest. The best book that I recommend for anyone who wants to educate themselves is Steve McKnight's book, "0 to 130 Properties in 3.5 Years". Now, that book is getting a bit old and so some of the strategies of purchasing that many properties in such a short period of time may not work, but this book goes through all the fundamentals. It goes through cash flow situations. It talks about high level investment strategies as well, so it's a great book for starters. So go to onproperty.com.au/130 and you can purchase that book online. Get it shipped out to you, which I found is the easiest to get it. So, if you're uneducated, you probably shouldn't invest in property. You should get educated first. The next reason that you don't want to invest in property is that you struggle to manage your own finances. So if you're struggling to manage your own cash flow, you're spending more than you earn, which, let's face it, most of us do. And you really struggle to understand a lot of things to do with finances. Things like managing your taxes. Things like credit card interest rates. Things like not spending more than you earn. Then, putting a property on top of that may be too difficult for you. And so, it may not be the best option for you. You might want to focus on improving your understanding of your own finances. Getting a better handle on that and then going ahead and purchasing a property. However, I do believe property can be a great way to learn about finances. And so, if you're willing to take the risk and you're willing to go ahead and learn as you do, and potentially make some mistakes along the way, then this probably shouldn't hold you back. So, it may hold you back or it may not. It depends on exactly who you are. The fifth personal reason, and the last one, that you probably shouldn't invest in property is that you’re fearful of debt. I don't mean like you don't really like debt, but I mean like you downright don't want to have any debt. Because, again, this comes back to number 2 – for people who couldn't get a loan. You basically going to need to go into debt in order to purchase property, unless you got an inheritance or you've won the lotto – in which case you probably don't even need to invest in property. But, anyway, you're probably going to need to acquire some debt in order to be able to purchase these assets. And so, if you're scared of debt, fearful of debt, something that you want to avoid at all costs, then property may not be your best investment vehicle. Now, I want to go into 11 investment reasons why you shouldn't invest in property. This may sound strange coming from someone who runs a property investment blog and someone who believes that property can be great investment vehicle if done correctly. However, there's 2 sides to every coin and I think it's good to be aware of some of the reasons you shouldn't invest. Some of the negatives of investing in property so you can make an educated decision about what is best for you. Because property is not the best investment vehicle for everyone. It may be business. It may be shares. It may be a bunch of other different things. Property may not be your thing. So let's go ahead, let's have a look at the 11 investment reasons you shouldn't purchase any property. Number 1, which is actually number 6 on our list, is your cash is not very liquid when you purchase a property. When you purchase a property, you're going to tie up a lot of cash as well as the debt that you're getting in to into one asset. Now, that asset isn't extremely liquid, which means you can't get access to that cash relatively easily. If you go ahead and you invest in shares, put $1,000 in shares, you can basically turn around that same day, re-sell those shares, get your money back. That's how day traders do these things, I think. I don't know. I'm not a day trader myself, but people are in and out of the share market really quickly. Whereas with property, you got through the process of listing your property, getting professional photos taken, holding open houses, getting offers on the table. Then, you've got to go through cooling off periods, signing the contract. Then, you've got through the waiting period until settlement. So, even if you go ahead, list your property, sell it that day, it could potentially be 4 or 6 weeks until you get the money and the property is sold. So, your cash isn't very liquid in property and in a lot of areas, it can take very long to sell your properties. In rural areas, it can be up to a year or more to sell a property. In city areas, it's a lot shorter than that. You're talking a couple of weeks to a couple of months there. Just know that you can't really get access to your money really quickly unless you've been smart with your finances, you've got a lot of equity and you've got ability to access that equity through increasing your debt, that's a different story. The number 7 is that you need to go into a lot of debt to purchase a property. So this is one of the investment reasons you may not want to invest in property is that you need to go into a lot of debt. Now, debt can be great because you're leveraging the money that you do have to buy a bigger asset, which if it grows, you can make more money. However, if the property goes backwards, you can lose a lot more money as well and you've got this debt that you now need to service. And if you don't have high enough rent or if your property is vacant for a period of time, that can put a lot of pressure on you. So you may not want to invest in property because you will need to go into a certain amount of debt in order to do it. Unless, like we talked about previously, you have a large inheritance or you've just won the lotto. In which case, good on you. Congratulations. I never buy lotto tickets. I worked on a lotto counter for years and it's just such a rare chance of winning that I made the decision I'm never going to buy lotto tickets. The money that I'll make, I'll make myself. I'm not going to leave it up to chance. And so, that is not me. I'll probably have to go into debt to purchase my properties and you'll probably have to do the same. Reason number 8 is that it's expensive to buy and sell properties. When you're purchasing investment properties, you generally need to pay capital gains tax,