Investing primarily in property is a long-term prospect, if you are thinking that property investment is short term than you have either been very lucky with flipping property or not lucky at all.
Google, your neighbour, your parents, your brother, your sister, your work colleague, we know there is no shortage on information about property investment out there in the world and what you should be doing to become a budding property investor. However, lets look at common mistakes that end up being great tips when it comes to property investment.
These tips can help the beginners and the avid investors especially as we come out of COVID-19 crisis.
Fail to Plan, Plan to Fail
Its an old saying and in life is connected to a vast majority of what we do and rings very true when it comes to property investment.
Buying a great property in lucrative spot, having multiple properties – is this a plan?
If we do not have direction when it comes to property investment it would be like setting out on a tour of Australia with no road map or no GPS, yes we can start and direct ourselves a little but evidently we shall hit a dead-end, have to do a U-Turn and get totally LOST.
In reality, planning is bringing the future into the present so you can do something about it now! What type of property do you need to buy in order to meet your income goals?
Successful wealth creation through real estate requires you to set goals, determining where you want to end up, and then arranging a sustainable plan to get there. Focus on both the short and long term and ensure your investment decisions gels with YOU.
With a carefully thought through outline of your investment journey, you will end up exactly where you want to be.
So plan your action and then action your plan..
The real benefit is you’ll be able to grow your wealth through your property portfolio faster and more safely than the average investor by sticking to YOUR OWN plan.
Heart over Head
90% heart and 10% head will come into play when you purchase your first home it is only logical. We are purchasing a home to live in, raise our kids in, have family time in, it should be emotional.
When it comes to investing, this idealist notion needs to be left at the door…
Allowing your heart to make a decision regarding investment is a common mistake and one that will often lead into disappointment and over capitalising.
Property Investment needs to be based on Head, it needs to be based on research and analytical data.
Will the property provide the gains and returns you require? It is in the best location to attract quality tenants? Will it appeal to the owner-occupier market that sustains property prices in the long term? Does it have a lot of work to maintain the appearance?
By answering these questions, rather than buying a house because you loved the colours and the abundance or thought it would make a good holiday retreat, you’re thinking based on financial gain rather than personal feelings.
And at the end of the day, investing is all about economics, not the emotions.
Impulsive or Cautious
Common mistakes of investors especially when it comes to their first property will either act too impulsively or become over cautious and never act.
Property Investment is a balance of both.
Learn as much as you can to educate yourself and work on your action plan, like most things in life we cannot know it all, but we can know enough to be able to assist ourselves. At times this knowing is actually being in the game itself.
Remember if its sounds too good to be true it often is.
Stick to your action plan, your goals and you will find the properties that are right for YOU.
Patience over FOMO
Property Investment is a long-term prospect, a common mistake by investors in this space is FOMO not patience. They fear of missing out, missing out on being the next millionaire or billionaire.
Property Investment is not a get rich quick option, Property Investment is about financial security and long-term.
Where some might see this as a shortcoming, I see it as a strength. Property is a proven commodity that we all need, it has the tried and tested ability to provide steady, long term gains through the power of compounding.
In other words, you use the gains you make from one property to leverage into another property and then with the combined gains you make from those two properties, you buy more to add to your portfolio.
Better still, you can use other people’s money (borrowed from the banks) to do so. No other commodity gives you the ability to do this so successfully.
By approaching property investment with patience and persistence, you will gain far more success (and wealth) than if you seek out the “next big thing”.
Not doing your OWN homework/ research
Understanding property investment takes time, similar to how we learn how to write, read, do maths, its all about practise and learning.
Do not think just because you have attended a few seminars and read a few books you are an expert and will become an overnight success story in the property investment industry. Perspective is what is lacking and that is something money cannot buy.
There is a big difference when is comes to knowing our local neighbourhood because you grew up in the area to understanding the investment fundamentals of the property market in that neighbourhood.
It may mean that you find experts in this field to assist you.
Buying the wrong property
The most common of all investment property mistakes.
And one that will continue to be if you do not stick to your action plan, your goal, your research, assistance from experts.
Find what an investment grade property is all about and work within the parameters.
Understanding all the costs involved in property investment is difficult, again it will come down to research and understanding of all costs involved and seeking assistance of a professional accountant, financial planner or property investment channel expert is highly suggestable.
You need to ensure that you can afford to hold onto any property you buy and if you cannot are you be able to manage the shortfall.
It’s great to dream about the riches you can make from real estate, but it’s critical to enter into property investment with your eyes wide open when it comes to all the out of pocket expenses you’ll incur along the way.
Examine each potential investment analytically and ensure you make adequate allowances.
Finance- do it on your own
You will soon realise along the property investment journey that investing is a game of finance with some houses/property thrown in the middle.
You will hear, do not use a finance expert they are only out for what they can get, WRONG.
A professional, qualified finance broker is your asset.
Going it alone will become daunting and overwhelming especially as your portfolio expands.
Setting up an incorrect financial structure can be just as damaging to your property investment journey as buying the wrong type of property, it can cost you thousands.
Structure, lending avenues, having various solutions available are just some of the considerations you need to make and a great broker who understands investment will be your growth asset.
You found the property, it is in the right location, property looks good, it is within my budget…. However have you really done every bit of research you can for your investment?
Make sure that you are no haphazard just because you found a property…
Do you know why the vendor is selling? Understanding a vendors reason can assist you when it comes to negotiating price. When you walk through property in open house inspections look for clues within the property about the vendors personal situation – are they going through a divorce? Whilst this may sound callous, it is an opportunity for you to gain a bargin and allowing the vendor to move on with their lives.
Have you conducted a pest and building inspection? The fees for these a tax-deductible and pay end of being the best investment you make if the property ends up having major structural issues that you need to remedy later on.
Is the property liveable from a tenants perspective? Can the property allow someone to move in upon settlement taking place or does it need work that will be out of your pocket to make it more attractive for tenants. Do multiple inspections at different times to understand the area more , it may be in the evening with car traffic the noise is deafening, how would tenants feel about that?
Save money by self- managing
You brought the property, its perfect.. now the hard work really begins. How will you manage the property?
Investors hear that self – managing a property helps with cost saving- out of pocket expenses are limited if you self- manage
Is this really the case?
You have to find tenants, you have to advertise, meet with potential tenants to inspect the property, you need to get the marketing material ready, you need to ask the right questions, you need to reference check the potential tenants, you need to manage payment of rental income each week, fortnight or month, you need to have plumbers, electricians, tradespeople on hand to assist with any repairs… and the list goes on.. And you need to do all of this while working a 9-5 job and look after your family…
The on-going management of a property portfolio is a full time job. Does the above sound appealing…
Finding a professional, knowledgeable, local rental manager is another asset tool in your kit.
Instead of using all your time managing your property they can be doing this for you and that time saved allows you to find the next property ?
The above common mistakes do really become tips when it comes to investing in property and whether you are a home buyer, a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.
Please click on the link to organise a time to have a chat over a nice cuppa and chocolate biscuit with one of our friendly experts.