For many Australians, buying a property is one of the most significant decisions they will make, often accompanied by a high level of stress.
While purchasing a home is already an emotionally charged process, the stakes can be even higher with investment properties, where financial gain and long-term independence are on the line.
Let’s untangle both the mental and tangible barriers that often arise, dispel limiting beliefs, and replace them with the know-how to make empowered investment decisions.
Perceived and mindset barriers
The first major barrier is mindset. Often, investors are held back by their perceptions of the market or a lack of understanding about its workings. These mindset issues cloud judgement, making property investment seem more overwhelming than it is. Recognising these mental barriers is the first step toward overcoming them and making informed decisions.
FOBO (Fear of Better Options)
One common mindset issue is the pursuit of the ‘perfect’ property. The truth is, a perfect property doesn’t exist. Buyers with FOBO (Fear of Better Options) often get caught up in regret, thinking about missed opportunities – ‘I should have bought that one’ or ‘What if I had bought that one?’ This backward-looking mindset causes them to miss future opportunities.
FOBO sufferers might also target properties beyond their budget, without realising why they’re unattainable, or they might wait for ‘ideal’ market conditions. This constant postponing is detrimental. There will always be reasons – whether it’s market conditions or interest rates – not to buy. The key is to focus on your personal circumstances and make decisions when the timing is right for you, rather than waiting for perfect external conditions.
Overcoming FOBO
To overcome FOBO, it’s crucial to accept that no property is perfect. Market conditions will never be flawless, either. The sooner you accept this, the easier it becomes to commit to the process. A helpful strategy is to create a checklist of non-negotiables, preferable elements, and nice-to-haves for your investment. This structured approach helps you make decisions with confidence.
When purchasing an investment property, focus on capital growth. Prioritise features that will drive long-term financial growth, not personal preferences for living. Keeping your eyes on the financial objective will help avoid the trap of chasing perfection.
Being spooked by government legislation
One significant mindset factor for property investors is the fear of legislative changes. While regulatory shifts may not prevent you from purchasing a property outright, they can impact how you own and manage your investment. Over time, various legislative changes have left many first-time investors feeling uncertain, especially when the media amplifies either extreme positives or negatives.
A recent example is the tightening of land tax thresholds. Earlier this year, the threshold was lowered from $300,000 to $50,000, bringing more properties into the taxable bracket. This has added costs for many entry-level investors. Another is negative gearing. Various governments have debated limiting or even removing negative gearing benefits, with proposals including restricting the benefits to newly built properties or to the first one or two investment properties. Although none of these changes have been enacted, the debate creates uncertainty.
Additionally, tweaks to capital gains tax and the introduction of GST have raised concerns about how property prices might be impacted. Changes to the Residential Tenancies Act, which require landlords to meet new standards – such as installing air conditioning or improving draft-proofing – can increase maintenance costs.
Despite these challenges, it’s essential not to let fear of legislative changes derail your investment plans. By staying informed and seeking professional advice, you can navigate these shifts and even uncover opportunities.
Shifting your focus: Legislation can create opportunities
Concerns about legislative changes or market shifts shouldn’t paralyse your decision-making. Instead, take these challenges as opportunities to seek professional advice and research how they might impact your strategy. What some perceive as negatives may actually open up investment opportunities.
Take the recent increase in land tax as an example. While it might seem like an added cost, this change has led some investors to offload properties, creating opportunities to buy below market value. Securing the right property in favourable market conditions can offset the extra land tax costs over time. Additionally, with interest rates projected to drop within the next 12 months, you could gain more financial flexibility.
Similarly, changes to the Residential Tenancies Act could work in your favour. Purchasing a property that’s already compliant with new regulations – such as those requiring air conditioning or draft-proofing – allows you to avoid those upgrade costs. Furthermore, unrenovated properties aren’t performing as well in the current market due to hesitation around working with trades. This presents an opportunity to buy such properties at a lower price, complete a cosmetic renovation, and significantly increase rental returns, making your investment more profitable.
In both cases, shifting your focus from the perceived negatives to how these changes can benefit you can transform potential challenges into profitable opportunities. Staying informed, proactive, and open to adapting your strategy will help you make the market work for you.
Tangible, hard-and-fast challenges
Now, let’s shift focus to some of the actual barriers that can prevent you from buying property – especially for first-time investors. Unlike mindset issues, these are concrete challenges that require practical solutions. While they can be daunting, particularly for those new to the market, they are not insurmountable. By recognising these barriers early and finding strategies to address them, you can position yourself to overcome obstacles and make informed decisions about your property investment journey.
Competing costs: managing the dips
The first actual barrier is cost – particularly when your financial priorities may be focused elsewhere. You might be purchasing a home or renovating an existing property, which can redirect available funds away from investing. Other life events, such as getting married, having children, or dealing with significant expenses like school fees, can also delay property investment. Additionally, changing jobs or careers can impact your ability to secure financing, as lenders may be hesitant during times of financial transition.
These life factors are completely understandable and need to be carefully considered. Just because an investment property isn’t a priority right now doesn’t mean it’s off the table for the future. By laying out your financial goals and planning ahead, you can revisit property investment when the timing is better suited to your circumstances.
Leveraging the lifts
On the flip side, positive financial developments can create opportunities for property investment. For instance, a job promotion and wage increase, giving you the chance to allocate extra funds toward an investment property. Similarly, receiving an inheritance could provide the financial boost needed for a deposit, allowing you to enter the market sooner than expected.
The key to navigating both the financial challenges and opportunities is to seek expert professional advice. Consulting an expert can help you better understand your financial capabilities, pinpoint areas for improvement, and clarify what is feasible for you. Many people are unaware of their true financial potential until they sit down with a professional who can guide them through the process.
Take home message
While property investment can be intimidating, understanding the barriers – both mental and tangible – and leveraging opportunities can help you make both prudent and empowering decisions.
With careful planning, professional advice, and a focus on long-term growth, you can often turn challenges into opportunities and secure your financial future through property investment.
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