However, there are some common property investment mistakes many investors make that could easily be avoided.
Wading or waiting
Successful property investors purchase when the conditions are right for their individual wealth creation goals. They don’t wait for the market to improve or wait for prices to rise or fall.
However, two common mistakes made by newer investors are to jump in at the deep end too quickly, or they procrastinate for so long that they never do anything at all.
Some people are guilty of wading into the investing waters in too much of a hurry. They seem to think they’ll miss out on something unless they act right now. The result can often be buying the wrong property to suit their goals, or choosing a lemon that they’ll regret later.
The other type of person tends to procrastinate and wait for a variety of factors. Some are held back by fear, some believe they need to learn more before they get started, and some end up with ‘analysis paralysis’, unable to do anything because they’ve been overloaded with conflicting information about what they should do first.
The best option is to find your own personal happy medium. Learn what you need to know in order to feel comfortable about your decision, but don’t jump in blindly and definitely don’t procrastinate to the point where you do nothing at all.
Not having an investment strategy
What end goal are you hoping to achieve by purchasing an investment property? Perhaps your goal is to allow the property to appreciate in value over the next few years so you can sell it and take advantage of any capital growth (minus any capital gains tax, of course).
Maybe your goal is to minimise your tax liability by purchasing a negatively geared property. Alternatively, perhaps you might prefer to generate cash flow from profits made with the rental income by buying a positively geared property.
Regardless of what your strategy might be, it’s important you know the reasons why you’re investing in property before you sign on the dotted line. Successful wealth creation is all about setting goals, creating a plan to achieve those goals, and then sticking to that plan.
Buying on emotion
If you’re buying a home for you and your family to live in, it makes sense that your purchase will be based on emotion. After all, it’s the sanctuary where you’ll live your life.
However, when it comes to buying an investment property, your decision should always be based purely on analytical research. Remove the emotion from your decision and pay attention to the finer details of the investment itself.
Work out whether the property is likely to provide the gains or returns you expect. Determine whether the supply and demand in the location you’re considering is right for attracting good tenants.
When it comes right down to it, investing is about the economics of the individual deal, not the emotions associated with the home.
Trying to get rich quick
One of the most common mistakes many property investors make is hoping to get rich quick through property. They seem to believe they can buy a ‘bargain’ property, spend a few hundred dollars on some cosmetic basics, sell it again at a huge profit and laugh all the way to the bank.
Property gives you the power to benefit from long-term capital gains. You can benefit from rental income and tax advantages of being a landlord. You can also leverage property to purchase another property to add to your portfolio so you start compounding your efforts overall.
In reality, getting rich through property is a long-term strategy that works really well if you’re patient. Create a solid investing plan that works for your individual financial situation. Then stick to it.
Not doing your homework
One of the biggest mistakes any property investor can make is not doing all their homework before jumping into the market. Take the time to understand the real estate market a little better. Learn about the suburb you want to invest in and work out what demand is like for rental properties in that area.
Ask a conveyancer what fees and charges you’re expected to pay on the purchase. Talk with a good property manager and understand exactly what service you’ll be getting if you engage their services.
Book an appointment with a good mortgage broker and discuss your financing options to ensure you’re using the right financial structure for your individual situation. Speak with your accountant to find out how an investment property might impact your tax situation.
The key to building a successful investment property portfolio is learning to avoid simple mistakes so you can mitigate your risk. By avoiding some of the more common mistakes many investors make, you’re in a stronger position to choose the right investment property to help you reach your financial goals.
Contact Nieuvision on 1300 832 554 before you invest to ensure you are on the right track to creating a wealthier you! Or to book a seat at Nieuvision’s next FREE property investment info session click here.
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