7 Common First Time Investor Mistakes to Avoid
With Australia’s decade-long love affair with property investment continuing, and historically low interest rates a feature of the investment landscape, real estate investing looks set to continue to dominate the nations investing preferences as one of the major tools people use to secure their financial future. When you are planning your start in real estate, it’s important to learn the key first time investor mistakes to avoid.
Starting out in real estate investing can be a lot easier when you avoid these seven common mistakes people new to property investing often make.
#1 – Not Doing Your Research
While your first foray into property investing is inspiring and exciting sometimes, while caught-up in the joy of finally living your dreams, it is common to overlook the need to do adequate research about your first property acquisition.
An important aspect of researching a candidate property is the location. Is it ideal for the people who you want to recruit to rent the property? Beyond this, and looking to the long-term, does the location suit a buyer? Access to public transport, shopping and recreational facilities are all important things to find out about your property before purchasing. You will also want to find out about the property’s zoning. What can the property be used for? Are there any plans for council to re-zone the area?
Knowing these things can help you make the best investment decisions you can.
#2 – The Right Loan and Ownership Structure for Your Investment Property
There are so many things to consider when it comes to choosing the right structure for your property. Getting the best advice you can about the right kind of loan facility, legal ownership structure, and tax and financial planning can make a real difference to your future property investment success. In many cases, these questions can have very complex answers and it is always best to get help from experts to make sure you’re building your real estate empire on solid foundations.
#3 – Doing it All Alone
Starting your property investment journey alone, without any help from professionals who can give you time-saving, as well as money-saving, advice is a sure way to land yourself in trouble – if not immediately then certainly in the future. Mortgage brokers, pest and building inspectors, solicitors and conveyancers, and property managers can all help you achieve the best possible results for your real estate investment. They can also help you avoid some of the pain you could experience when things go wrong or you don’t know how to deal with something.
#4 – Paying too Much
Investors who have had success with property for a long time will tell you that, when it comes to property investing, the money is made in the buying rather than the selling. It is very important you don’t pay too much for your property. The price you pay affects how much you can afford to rent the property for, its competitiveness in the local rental market, and your rate of return throughout the property’s life. This also impacts your cash-flow and can lead to under-achieving your property investment goals. However, if you buy it right, you will be off to a good start in achieving real estate investment success.
#5 – Factor-in Property Expenses
Many first-time property investors don’t adequately identify and plan for the ongoing expenses of property ownership. Rates, a larger portion of the water bill, maintenance and repairs, insurance and tax compliance costs are just some of the costs to consider. Acquisition, management and re-marketing costs also need to be considered.
Experienced property investors often recommend to keep around 1% of the home’s value aside for ongoing costs of ownership. Another way this can be approached is to arrange with your property manager to schedule repairs and maintenance, and then set aside funds from the rental income you receive to cover these expenses. Whichever way you approach it, being prepared in advance will ensure you achieve the best results possible.
#6 – Buying with the Heart and not the Head
First-time investors often choose to buy property in areas they would like to live in, and houses they would like to live in. However, as a property investor you really need to think about whether the style of house and property location are going to give you the best return. Choosing a location that is desirable for the rental market, and in the future a possible buyer, should dominate your decision-making.
#7 – Procrastinating and Doing Nothing
First-time property investing is a big step into the unknown. One mistake common to investors starting out is to do nothing and take too long to decide on fundamental aspects of making your plans come to life. The property market waits for no one, and some of the best deals with the best returns, can be lost. Your first experience can be nerve-wracking, but that is what we are here for.
The journey ahead is an exciting one!
The Vision Property & Finance team of experts can give you a wealth of advice to help you better understand what you’re facing in the months and years ahead. Call on 1800 004 663 or contact us today to start your property investment journey.