Common Property Investment Mistakes to Avoid
Making the decision to invest in property can be a positive step towards creating financial security and building wealth. Yet there are some common mistakes many property investors make that could hinder any progress they hope to achieve.
Here are some of the more common property investment mistakes many investors make that might easily be avoided.
It’s always advised that all property investors spend plenty of time learning as much as they can about property investment. It’s a good idea to understand how your investment mortgage is structured, what rental yields your property achieves, what your management and ongoing costs of ownership will be, and what costs can be tax deductible to help reduce your tax liability.
However, some investors spend so much time learning, studying and analysing that they end up paralysed with information overload. They try to wait for the market to improve or wait for prices to rise or fall in certain areas before moving forward. The result is that they procrastinate and end up doing nothing at all.
A successful property investor purchases when the conditions are right for their personal wealth creation goals. Learn what you need to know to feel comfortable about your investment decisions, but don’t procrastinate endlessly.
Diving into the deep end
Far too many people hear tales about other people generating lots of wealth through property investment and they immediately dive feet first into the deep end. They might see a story on the news about an impending rise in property prices and jump in out of fear that they might miss out on something.
Others might read a property investment success story in a magazine or online that provides the bare-bones of a strategy and they wade right in, thinking they’re going to get the exact same results
No matter what the reason, buying an investment property on impulse can mean buying the wrong property to achieve your investing goals or choosing a lemon that they’ll regret later.
Not creating your own investment strategy
Property investment is never an exact science. What works well for one investor might be completely wrong for another. Yet many investors make the mistake of trying to follow an investment strategy that works really well for someone else without taking into account their own unique financial circumstances.
Your financial situation is not the same as anyone else’s. Your income and expenses are unique to you and the results you hope to achieve by investing in property are also your own individual goals.
Before taking the leap into property investment, take the time to determine what your own personal end goals might be. Know what you want to achieve by investing in property and create a strategy that works with your own personal financial situation.
Get rich quick mentality
One of the most common mistakes many property investors make is believing that property will help them get rich quickly. After all, there are so many TV shows about renovating or flipping that make it seem like the participants all make hundreds of thousands of dollars in profits in just a few weeks.
The result of so many different TV shows about property is that some investors believe they can buy a bargain property, spend a few hundred dollars on some cosmetic improvements, and sell it at a huge profit.
In reality, successful investors understand that investing in property is a long-term strategy. A savvy investor knows there is a potential for long-term capital growth in the property’s value. There is also the added revenue generated by rental income, along with various tax benefits of being a landlord to take into account.
Not doing your due diligence
One of the direst mistakes a property investor can make is not completing all their due diligence before signing on the dotted line. Take the time to learn about the suburb in which you’re investing. Know what potential rental demand is like and discuss the estimated rental amount you might charge for your property with a good property manager who is familiar with the location.
Speak to a conveyancer about any fees and charges that may be associated with buying your investment property. Book an appointment to speak with your accountant about your plans to invest in property and be sure you have the right ownership structure in place. Your accountant will also advise you on what costs and fees to keep track of to help maximise your tax deductions.
Talk with a home loan consultant to be sure you have the right investment mortgage in place for your property purchase and you’re using the right financial structure for your individual situation.
The key to becoming a successful property investor is learning to avoid some of the more common mistakes others make. Learn from those mistakes and use your knowledge to reduce your risks. You’ll be in a stronger position to make informed decisions about choosing the right investment property to help you achieve your financial goals.
This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.