Victoria Devine is transforming the way Millennials think about money.
With a background in behavioural psychology and two chart-topping podcasts, She's on the Money and The Property Playbook, the award-winning financial adviser understands what makes her generation tick and knows how to make hard-to-understand concepts fun, fresh and relatable.
Her latest book, Property with She's on the Money, is an informative guide - whether you're getting your first foot on the ladder, hunting for your dream home or planning for an investment property.
- This is an edited extract from Property with She's on the Money, by Victoria Devine. Penguin Books. $32.99.
The pros and cons of investing in property
Whether you are financially ready or just starting out, there is real pressure to buy property in Australia. There's a LOT to consider around property before you can make the decision to purchase, and even if you determine that buying property is definitely for you, you still want to make sure to buy the right place at the right time.
If you're a dedicated She's on the Money member, it's likely that you're driven by the goal of financial freedom - life supported by a passive income stream. The question is: is property the right way for you to achieve this, or are there other strategies that are better for you?
In my second book, Investing with She's on the Money, we look in detail at a number of investment pathways that can help build up your wealth. There is absolutely no expectation that property has to be the vehicle for this (although it can be!). Some, like Rich Dad, Poor Dad's Robert Kiyosaki, suggest that "owning your own home is not an asset" - however, this viewpoint is challenged by many, especially in regards to Australian property. My thoughts are that while property can be an epic asset, your family home shouldn't be viewed as such.
As with all financial purchases and lifestyles, comparisonitis is the devil - particularly because it's so hard to really know everyone else's history or circumstances beyond what you might see from the outside. You'll know, either from your own experience or from listening to my podcast, that comparisonitis can lead us down a path paved with bad debt, so we certainly don't want to invite it in at the scale of a mortgage!
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Before you agree to any property purchase, I really encourage you to think about what it is you're committing to and why, run the numbers several times, and follow Property with She's on the Money's activities to test your saving and repayment thresholds before you sign on the dotted line. Remember: when it comes to figuring out the best way to build YOUR future wealth, you're truly running your own race!
Let's briefly consider some of the pros and cons of investing in property. Just to get your brain juices flowing, here are some considerations unique to property investing.
Ten reasons why ...
Pros of investing in property
1. You meet the human need for shelter.
2. It's a place to call your own.
3. You can use and enjoy it while you're paying it off (the ultimate buy now, pay later!).
4. Compared with some investments, it's reasonably straightforward to understand.
5. Median property values, historically, have grown over time.
6. It's typically a stable investment over the medium-to-long term.
7. It can generate income and/or reduce the costs of running a business.
8. It offers the potential to reduce your tax (negative gearing).
9. It can create access to funding when used as a security (rather than cash).
10. You can have a direct impact on improving its value (unlike buying shares in a company).
Cons of investing in property
1. It can be really, really expensive.
2. It may keep you in debt for a long time.
3. It's difficult to predict interest rates, which can impact your standard of living.
4. You may not be able to afford the house of your dreams, so find yourself paying off something you don't "really" love (unless we change your property mindset - more on that to come!).
5. It's hard to cash in quickly (what investors call an "illiquid asset" - unlike cash, which is "liquid" and immediately available).
6. Holding onto a property costs money in ongoing maintenance, fees (rates, body corporate) and perhaps in lost or below-market rental income, among other things.
7. Property is not a "set-and-forget" investment; it requires ongoing care and maintenance.
8. Property involves many moving parts and people, which can bring potential issues.
9. Capital growth is not guaranteed - despite what people like to say, the property market does not uniformly rise in every area, every seven years.
10. It can be risky if you invest in areas slow to develop, or you are trying to make fast money using a "flip" strategy during times when the market drops.
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