Making an investment in a property can be a rewarding experience, both personally and financially. However, there are some common mistakes that first time investors make that can make it more of a nightmare. By avoiding the following four mistakes, you can make the most of your property investment!
Not Doing your Homework
Some people think they can attend a seminar, read a few books and they are ready to invest in property! Not so fast! You can never know too much about the investment you are getting ready to make. So make yourself completely familiar with any given area by pounding the pavement and talking to the locals, real estate agents and property managers. Find out all about the amenities, vacancy rates and historical values of properties in the area.
Using Emotions to Make Decisions
A common mistake in property investment trying to buy a property for its lifestyle benefits rather than its fundamentals. Using your investment as a holiday home and an investment property doesn’t work. Holiday homes often had poor yields, poor capital growth and require a lot of maintenance. Investors should be prepared to walk away if the numbers don’t add up and they realize they are buying the property solely for the emotional value.
A long-term mindset is important when investing in a property. It is not uncommon for investors to get over-confident once they have acquired multiple properties, and begin over-borrowing. But refinancing can become impossible if an investor has borrowed to their limit. Always project your cash flow, and set aside an emergency or reserve fund. This way you will be prepared if your investment does suffer a short-term shortfall in rental income.
Doing Everything on your Own
It is unrealistic to think that you can handle the litany of problems that will inevitably come with a property. As a smart investor, you should tap every possible resource available to you. You should have a real estate agent, home inspector, handyman and lawyer. With this buffer-zone of help, you can avoid making crucial mistakes when it comes to your property investment.
By avoiding these classic mistakes, you will be on the right track for success with your investment!