Everybody makes mistakes, even property investors. This article focuses on some of the biggest mistakes property investors make, and more importantly, how to avoid them.
Mistake 1:
Falling in love with the property – If you inspect a property and care what the curtains look like, whether the kitchen has stainless-steel appliances and what the colour scheme is, you’re probably making this mistake. You need to remember that the property is for someone else to live in “the tenant”. The best thing to do is consult with your property manager to find out about what features are desirable for tenants in a given area, rather than you guessing what you feel would be desirable for them. If you are looking for a property in a family targeted area, then dishwashers, fenced yards and safety around the home should be a priority.
Mistake 2:
Not seeking expert advice – Investors who sign on the dotted line without consulting their accountants, solicitors or finance brokers & property advocates are playing with fire. What is the impact of that property purchase on your taxable income? How much money can you actually borrow?”
Mistake 3:
Not having a risk mitigation strategy – Many investors fail to ask themselves questions such as: What happens if the property remains vacant for an extended period of time? What happens if the property burns down? What happens if interest rates go up? What happens if there is a change in your circumstances? What is your back-up plan if something goes wrong? A risk mitigation strategy will give you peace of mind today and tomorrow. You should consider insurance cover, back-up savings plans, and fixed or split interest rates.
Mistake 4:
Not performing due diligence – “Due diligence” is the research you should undertake prior to making the purchase to ascertain if the property is a good buy or not. It is often common for investors talk to the selling agent, ask a few questions and then make their decision. You should take into consideration how far away schools, shopping centres, medical facilities and transport are; what council’s plans for the area are; what capital growth the area has seen; and what the vacancy rate is, to name a few. You need to do your homework to ensure that you really are buying a great property.
Mistake 5:
Not crunching the numbers – Most investors rely on guesstimates rather than sitting down and doing the hard numbers related to their purchases.
For example, an investor purchased a negatively geared property in a major capital city thinking that it would be (negatively geared) by $100 a week. On proper analysis of the numbers, the investor discovered that the property was costing closer to $260 a week (out of pocket expenses).
For those investors who don’t feel confident about doing the calculations on paper, we strongly recommend that you seek advice from a professional accountant and property advocate.
When purchasing an investment property take your time, don’t get emotionally attached to the property, do your research, have a back-up plan and always seek professional advice from your building inspector, pest inspector and accountant or financial advisors.
Domain Property Advocates offers a Buyers Advocate service…call now to find out more 03 9509 6388.
If interested in learning more about this update please contact me today!
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As Domain Property Advocates continues to grow I will continue to provide superior service to those choosing to use property as their investment. It is an important choice of who to choose as the one responsible to look after your property. You can be sure that Domain Property Advocates will always strive to be the best. |  |
