7 Common Mistakes Property Investors Make (And How to Avoid Them)
Written by Miriam Sandkuhler, author of the best selling 'Property Prosperity - 7 Steps to Investing like an Expert'
Property investing may look easy but things aren’t always what they seem. Buying investment properties require a huge sum of money you simply can’t afford to waste and legal processes which may be too complex for you to deal with on your own. What can make things more confusing is that you may get conflicting advice.
The entire journey can be quite overwhelming which is why some investors commit mistakes that result in a loss of time and money. However, with a better understanding of the options you’re dealing with, you can make better choices.
If you’re looking for an investment property in Melbourne, take note of these common mistakes property investors make and learn how to avoid them.
MISTAKE #1: Thinking Free Advice Is Good Advice.
Nowadays, there are a lot of self-proclaimed experts, salesmen, financial planners and mortgage brokers saying they can offer you free education and advice on property investment. Little do you know that they’re really selling you property. Their free advice conveniently leads you to buying a property they have for sale. But this isn’t how it should be. A genuine property investment advisor should only provide accredited advice on a fee for service basis. This means the adviser is working for you with your best interests in mind.
How to avoid this mistake: Find an independent property investment advisor who is both a Licensed Buyers Agent and an Accredited Property Investment Advisor with extensive experience in the market.
MISTAKE #2: Not Understanding Risk.
In property investment, risk is the extent to which you are willing to expose yourself to loss in order to make a return. Risk can be managed through careful research, analysis and finding solid evidence that will support your investment decision. When planning to invest in property, it’s vital to understand your personal risk profile. With a better understanding of your risk profile, you will be able to make a more informed and appropriate decision when buying a property.
How to avoid this mistake: Know and understand your risk profile as well as the risks involved with various types of property. Learn about investment strategies to establish a sustainable property portfolio.
MISTAKE #3: Not Having a Documented Plan.
Much like building a house, you need a plan when buying property. You need to calculate a number of things such as your cost of living, the kind of lifestyle you want and the timeframe required for your investment plan to generate income. Additionally, it’s important to review your strategy to make sure your investment is always profitable and to modify your strategy when necessary. You must have a documented plan that will serve as your guide throughout your investment journey.
How to avoid this mistake: Set realistic financial targets and always keep your end goal in mind. Also consider your entry, hold and exit strategies.
MISTAKE #4: Not Engaging a Team of Experts.
If you were to build a house, you would need a team of experts to make sure the structure has strong foundations and will remain upright for years to come. The same thing applies to property investment. You’ll need different professionals who can help you every step of the way. Each one plays a key role in every stage of your journey. Property investment experts will be able to help you in a number of ways such as how to maximise the investment opportunity, minimise tax and risks, and help you achieve success.
How to avoid this mistake: Engage a team of licensed and qualified property experts. In the long run, their expert advice will save you time and money.
MISTAKE #5: Not Doing Adequate Research.
Too many investors have made the mistake of jumping to conclusions without doing enough research beforehand. When it comes to investing in property, the most basic thing you can do is to research, so you can determine what to buy and where to buy it. You also need to assess investment opportunities and consider economic drivers that may influence your returns. It is important to assess and understand the benefits and risks of each option in order for you to come up with a sound decision.
How to avoid this mistake: Do your homework and understand the importance of completing your due diligence before making a purchase. Don’t only rely on what real estate agents selling properties are telling you.
MISTAKE #6: Not Understanding the Rules.
Real estate agents abide by certain rules and so do buyers agents. If you don’t learn and understand what these rules are, you may fall victim to illegal practices. On the other hand, if you are well-informed about the rules, agents will know you’re a savvy buyer and thus won’t be fooled by any tricks.
How to avoid this mistake: Employ expert negotiators and strategists like Property Mavens who have the knowledge and skills to keep real estate agents honest and represent you at auctions.
MISTAKE #7: Not Reviewing Their Portfolio.
It is extremely important to check how your properties are performing over time. Unfortunately, many investors are not adequately equipped to keep track of their property’s performance. Ideally, you need to review your portfolio every year to ensure that your properties are performing well and still meeting your expectations. It is essential to monitor market conditions as well as local conditions.
How to avoid this mistake: Make sure your portfolio is reviewed annually. This allows you identify if your property is performing well within the market, ensuring everything is on track.
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