1. Head over heart
Property investors should always buy property based on research and analytical data, negotiating the best possible price and outcome for their investment goals.
What are the dominant local demographics?
Will this purchase lead to the capital gains or cash flow returns you require?
Is the property in the right location to attract quality tenants?
2. Strategic planning and setting goals is key
The key to property investing is to build a growing property portfolio. Create an investment plan and measure your progress. Is your property portfolio working for you? Or are you working for it….
Decide if you need to achieve income or growth. Manage your cash flow!
What type of property do you need to buy to meet your goals? Define your goals SMART. Especially for your timeline.
3. Diving in or Doubting
While the former gets moving, makes mistakes, learns and makes a success of their investment endeavours, the latter will stay stuck in their fears.
Find a happy medium – Yes, learn as much as possible to get comfortable with your investment decisions but do not wait until you “know it all” before you begin.
4. Speculation over Patience
It can take 20 to 30 years to grow a tree that produces quality fruit. Similarly, it takes time to build a quality asset base that produces substantial financial returns. Start early!
It takes time and research to buy quality property and there are costs involved. But bricks and mortar are a proven investment strategy, tried and tested to provide steady, long-term gains through the power of compounding.
5. Buying the wrong property
First, you need to choose the right investment location, one that will outperform surrounding areas through gentrification, infrastructure plans, employment opportunities, lifestyle appeal or high owner-occupiers demand.
Second, make sure to buy an investment-grade property – one that will remain in continuous strong demand by owner-occupier and tenants. Both now and in the future.
6. Poor cash flow management
Understanding all the costs involved in acquiring and holding a property is crucial. A good rule of thumb is to allow about 10% of the property’s value for costs such as rates, land taxes, insurance, maintenance, and management fees.
It is critical to enter property investment with your eyes wide open, when it comes to all the out-of-pocket expenses you will incur along the way.
7. Seek help from a qualified professional mortgage broker
When it comes to financing your property, there is rates, loan features, finance structuring, fees and lender policies to consider. Going it alone can be time-consuming and get you stuck in the wrong product, have you miss out on a purchase or worse.
Advice from a finance professional avoids all this and can save you thousands in the long run.
Setting up a financial structure that is not right for you is just as detrimental to your investment endeavours as selecting the wrong type of property. There are many considerations here and a good broker who understands investing will be able to guide you towards the right result.
8. Being less than thorough
Understanding the vendor’s motivation can make a big difference when it comes to negotiating a good price and the right terms. It gives you an opportunity to create a win win deal.
Getting pest and building inspections done uncovers any structural defects or signs of pest infestations, like termites. The property needs to be liveable from a tenant’s perspective plus provide you with many years of pain free ownership.
Ticking all the right boxes when you inspect a property will ensure you buy the best possible investment every time.
9. Saving by self-managing?
Many investors think by self-managing their portfolio will save them a packet and give them greater profit. Wrong! In the short term, this might seem plausible enough, but what happens when you have a portfolio of say twenty properties?
Paying a professional property manager to handle all these things on your behalf will not only mean you get the best outcome for your rental property in terms of a good tenant and the best possible returns, but it will also give you something just as valuable as money when it comes to investing – time.