6 Investor Mistakes And How To Avoid To Them
When it comes to property investment, knowledge is power.
Choose the right property, in the right location, with the right loan and strategy.
Whether you’re a first-time investor or have a portfolio of properties under your belt, mistakes are still easy to make.
To build a successful portfolio, here are our top slipups to avoid.
1. Lack of education
Always do your homework first.
There are multiple factors to consider such as price, goals, upkeep costs, potential growth and individual requirements.
Be prepared to view several properties to find the one that best meets your investment strategy.
2. Not having an ‘expert team’
Like business owners, investors should have experts to assist with the process.
Consider adding the following experts when building your A-team:
- Financial planner: For crunching numbers and ensuring purchases are aligned with your goals and objectives.
- Lender: The right home loan can make all the difference when it comes to making a profit
- Accountant: To help manage your investment property, offer advice on tax implications and keep your financial situation on track. - Solicitor: A solicitor will ensure agreements are legally binding and help interpret the fine print and jargon
3. Financing with the wrong money
First-time investors tend to use their savings as a deposit.
But if you have a home loan, it’s often more cost-effective to use your savings to clear debts and finance with equity.
Investment loans are tax-deductible whereas home loans aren’t. Ideally, you want your home loan to be interest only.
Crunch your numbers
Make sure you have enough cash reserves to cover essential costs like insurance, council rates, maintenance and contingency savings if you find yourself without tenants.
4. Heart over head
The property market is unemotional – your decision should be too.
You’re not buying a forever home or a property because it looks good or you ‘like it’.
Facts and figures must be the basis of investment decisions while ensuring every purchase is aligned with your long-term goals.
Property markets move in cycles, booms are in part driven by investors who buy too early in fear of missing out, downturns are perpetuated by investors who choose to stay out of the market in fear they’ll buy too early.
If you allow your emotions to creep in, poor decisions are more likely.
5. No long-term plan Property investment is all about long-term gains.
Avoid buying into trends and “hotspot locations”. Instead, focus on properties in areas that have a solid, stable and consistent growth over time.
For property investment to be sustainable, it needs to be dependable.
6. Changing your investment strategy
An investment strategy isn’t something you change because you found something else more tempting.
If you’re thinking about selling early, remind yourself why you initially invested in property.
Property is a long-term investment and changing your strategy part way through can be costly.
When in doubt, seek the advice of a professional.