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It’s hard to know which investment strategy to believe with so many conflicting opinions floating around the property market. So what myths do you swear by?

It’s hard to know which investment strategy to believe with so many conflicting opinions floating around the property market. So what myths do you swear by?

Only use interest only home loans on your investment property
Although interest only home loans are a good tool to manage cash flow, the should only be considered as part of your investment strategy.

After a few years of owning your property and receiving a consistent rental income, your objective should shift to paying off the principal so you can increase the equity in the property.

There are too many investors to compete against
According to new data from Roy Morgan Research, the number of investment property loans has grown by 37% compared to an increase of only 4% in the number of owner occupied loans. Although the number of investors in the property market is increasing, it does not mean there isn’t enough room for more investors to get their foot in the market.

The number of Australians who are property investors is still a relatively small portion compared to the rest of the population and there are even less with two or more properties. With the rate of population growing so fast, there is always going to be a demand for housing.

Only wealthy people can afford to invest
Property investors come in all forms and not all are wealthy. Although you do need to be in a good financial position in order to take out a home loan, you do not have to be rich. People on average incomes and even first home buyers are finding that they are able to save and purchase an investment property.  

Property always goes up in value
The property market is not always predictable, it can experience both growth spurts as well as intermittent lulls.  For example, values across all Australian capital cities rose by just 1.7 per cent in the March 2014 quarter compared to 3.8% for the December 2013 quarter and 2.5% for the September 2013 quarter (Australian Bureau of Statistics). But remember, past performance is not necessarily an indication of future performance. That is why it is important to be cautious when purchasing an investment property and be prepared if the market does slump and property values drop.

You should only buy investment properties near the CBD
Although you may assume that buying an investment property within or near the CBD will guarantee that you will not only get a high volume of interested tenants, but you will have a better chance of fast capital growth, this is not always the case. As there is only a limited amount of space within a city centre, problems such as traffic congestion and overpopulation can occur. As there is a limited amount of property available within the CBD area, rental properties are in high demand and many renters cannot afford to live there.

With work-life balance along with other factors becoming more important, more people are looking to move away from the city centre. It is important that you are still near essential infrastructure such as public transport, schools and shopping centres so that tenants will still have easy access to all of the necessities.