Investors shouldn't buy property to 'get rich quick' or for the sole purpose of claiming tax deductions, rather it should be a long-term strategy allowing one to still achieve personal lifestyle goals today and into the future, according to Ayda Shabanzadeh of Grow Consulting Group.
As various banking experts have recently expressed concern that negative gearing encourages a 'get rich quick' mentality, Shabanzadeh said investors should most certainly take advantage of these tax benefits because it means more cash in the investor’s pocket at the end of the day, but not rely on them to maintain the affordability of an investment.
Shabanzadeh said tax benefits should be viewed as an added bonus in a long-term strategy for wealth creation and should be used to pay off the mortgage faster.
Property investors should be able to achieve their goals for the future, while continuing to live the preferred lifestyle today, she said.
Affordability is important so if significant changes need to be made to an investor’s lifestyle to make or hold the investments then this needs to be seriously considered when determining what to buy, when to buy and how long to hold, she said.
"Everyone has a different lifestyle; some people like to travel frequently, others enjoy dining out regularly and still others find it important to afford private school fees for their children," said Shabanzadeh.
All property investors should ask themselves whether an investment will mean they need to alter those aspects of their lifestyle that are important to them, she said. "If yes, then it's not the right time to invest."
Buyers agent Chris Gray of Empire said even in a slow growth property cycle the strategy should still be about 'time in the market, not timing the market'.
It's important not to let the 'greed factor' get in the way with the often unrealistic ambition to become a millionaire overnight, he said. "The real secret to wealth is compounding your investments. Aim for consistency."
Generally investors buying and wanting to double property prices in seven to 10 years minimum rather than after a short period are the ones who make the most profit, he said.
These long-term strategy holders are the same people who will more easily afford the investment because they would’ve allowed the right buffers to take them the distance, Gray said.
While the plethora of renovation shows are enthusing investors to profit from fast renovations, investors need to understand the market is changing day by day so not every renovation will turn a decent profit, said Gray.
Renovators need to ensure they're renovating to the right demographic, and this does change through the process, he said.
"The families might be buying today, but the professional couples and investors might be buying in two to three months' time,” said Gray.
It's important to adapt to these changes in your renovation and speak to agents and go to local houses to remain up to date, he said.