Investing in property can provide the first step to financial freedom; however it is essential that the first property you invest in is done correctly. By getting your first investment property right, this can set you up for property number two, three and four, allowing you to reach your property goals much sooner.
However, like everything in life there is much to think about and it’s easy to make mistakes. Making costly and fatal mistakes though could severely harm your investment and your own financials before you’ve even begun.
So, to help you get on the right path, we have highlighted our top 14 fatal mistakes property investors might make
when they buy their first or even next property investment.
14 Fatal Mistakes Made By Property Investors
1. Not setting clear goals
One of the first things you need to do is set yourself clear goals. What is it that you are actually trying to achieve from investing in property? Do you want to use this property to help you retire comfortably, or do you want to build up a strong property portfolio to allow you to reduce your working hours and put some extra money in your pocket? Write down exactly what it is you want to achieve so that you have something to work towards and accomplish. However, keep the goals realistic.
2. Overstretching your budget
Another common fatal mistake
that property investors tend to make is overstretching their budget and buying a property that does not comfortably sit within their means. You should buy a property that you can comfortably afford with the ability to make monthly repayments even if interest rates rise or to cover costs when you cannot find tenants to rent out the property. It’s therefore best to speak to a Mortgage Broker to learn more.
3. Listening to bad advice
When buying property, you might find that your friends and family will be giving you their own opinions and advice on what you should do based on what they’ve heard or read in the papers. However, you should only be taking advice from experts who work in the property market or who have successfully invested in numerous properties before. You wouldn’t consult your hairdresser about plumbing, likewise you shouldn’t consult your friends about investing in property, unless of course they are a savvy investor themselves. Speak to experts like our Property Consultants at iBuyNew to tap into a wealth of knowledge and gain valuable reports and insights into the current property market.
4. Not doing your due diligence and research
Investing in property is likely to be one of the largest purchases you will ever make, so you want to make sure you get it right to avoid making a fatal mistake. This means that you spend the time to do your full due diligence and research on the property and suburb itself. This means looking at key factors such as location, rental yields, vacancy rates, population growth rate, demographics, property comparisons, future infrastructure and much more. Our iBuyNew Property Consultants can assist you with all of this.
5. Lack of education about the property market
When investing in property then it is important that you educate yourself as much as possible about the property market and understand key terms that are commonly used. It is important to understand what you are getting yourself involved with to ensure you are making the right decisions, rather than relying on other people.
6. No motivation and commitment
It’s important that when searching for a property that you stay focused, motivated and committed. This can be hard with everything else happening around you, but as buying a property is such a large and important purchase, you should be willing to put the time and effort into finding the right one.
7. Letting fear stop you from proceeding
One factor that stops many property buyers from actually taking the plunge and purchasing the property is fear. The fear of buying the wrong property, the fear that something will go wrong or the fear that something better will come along are many common fears that can take hold of us. However, the fear of not doing anything should be your greatest fear of all, as if you don’t buy a property today, when will you?
8. Purchasing property in a poor growth area
We’ve heard it all before, but location is key to success. Buy in a rural area, away from core amenities and you are very likely to see poor growth, no growth or even backwards growth. You should therefore ensure that you get the location right, that being a property that is close to public transport, schools, shops, restaurants and parks to ensure that tenants have lifestyle factors within an easy walk.
9. Getting emotionally attached
Getting emotionally attached can definitely be a fatal mistake when investing in property. First home buyers in particular can get emotionally attached to a property which can cloud their judgement. Yes, buying a property can be an overwhelming process, but as a property investor you are buying a property not to live in, but for other tenants to call home and pay the rent for you. Treat your property as a vehicle to get you to your goals and try to look at all of the facts in front of you that say this particular property makes a good investment. You should also try to avoid all the pretty pictures that can easily influence your opinions. It might be the best looking property you’ve seen with amazing facilities, but if it is situated in the middle of nowhere, the likelihood of achieving high capital growth is pretty low.
10. No safety net
It’s always a good idea when investing in property to have some surplus cash behind you that you can tap into quickly if required. You might have unexpected costs that might creep up on you which you need to cover. When buying property off the plan, then the time between exchange and settlement, usually around two years gives you additional time to save up a larger deposit or to get some additional savings behind you in case of a rainy day emergency.
11. Bad financing
When investing in property, you also need to get your finances in order and a Mortgage Broker can assist you with this, reducing the chances of you making a fatal mistake. If you have any bad debt such as car loans or credit card debt, then you need to pay this off first and start afresh. Having no bad debts will improve your chances of getting finance from a bank or lender and a better finance strategy will allow you to plan ahead to your second, third or fourth property purchase.
12. Choosing the wrong investment strategy
There are many different types of investment strategies out there and it can be hard to know what one to take. This is where your goals come in. By knowing what it is you want to achieve can help you focus on the type of strategy you should go down. For example, you might be a first home buyer trying to enter the property market; however, it is far easier to become an investor first and buy in a more affordable, high growth area, whilst still rent. This is known as rentvesting
and many Gen Y’s in particular are utilising this strategy to get on the property ladder, whilst continue to live in an area that they want to live in.
13. Using a dodgy developer
Another fatal mistake that many property investors make is not doing their homework and using a dodgy developer. This means that the quality and craftsmanship is unlikely to be up to scratch, there could be delays with the build or the property might not even go ahead if you are buying off the plan. You should therefore research your developer thoroughly to ensure they are reputable and take a look at some of their past projects to get an idea of what they produce. You can even go as far as asking past customers their experience and what they think of the build quality.
14. Not learning from your mistakes
Finally, it’s ok to make mistakes, as long as you learn from them. The worst thing to do is making a mistake in the first place and then for the same mistake to happen again. By knowing exactly what you want, researching properly and talking with experts like iBuyNew, this can help you eliminate some of the risks which you face and ensure the path to a strong property portfolio is much easier.
To find out more about how you can avoid making a fatal mistake when investing in property, it’s best to speak to one of our friendly iBuyNew Property Consultants. The team have years of experience between them and can assist you with any advice that you require when investing in property, whether it is your first time or third time.
Give us a call today on 1300 123 463
to find out more how you can avoid making a fatal mistake
and achieve property success sooner than you think.
If you're looking at purchasing your first investment property, you might also want to read this useful article: "Top 15 tips for buying your first investment property
Published on 20th of February 2017 by Marty Stanowich