Four Mistakes to Avoid in Property Investment
Regardless of if you're a newbie or an investor with 10 properties under your belt, the same mistakes can be made across the spectrum.
Here are four mistakes that real estate investors can often make when buying a rental property.
Not performing due diligence
One of the biggest and most common mistakes that real estate investors can make is not performing their due diligence before entering a contract of sale.
This is a crucial step, as doing this will allow you to properly research both the market and the property in mind.
Failure to perform proper due diligence could leave you with a house that needs significant repair and maintenance, or potentially investing in a bad area.
Before entering the real estate market, consult with an experienced real estate agent who has an eye for rental properties and the rental market.
Always obtain a sound property inspection of the home before settling on the sale and keep an eye on trends in values and growth.
Failure to create a strategy
Have you thought of an investment strategy for your property? Like any business, property investment needs to have a plan for you to adhere to in order to be successful. This needs goals, a timeline and ways to get you there.
For instance, you might choose to buy a property and renovate it to sell within two years.
Alternatively, you may wish to buy and rent it out over the long term and sell it once capital growth reaches a desirable level.
Misjudging your cash flow
Whichever investment strategy you decide to select for your property will give you an indication of the level of cash flow you'll receive from your home.
Some owners can misjudge this and predict amounts far-off from the income that actually comes in, leading them to have more expenses than cash flow.
Before securing a rental property for investment, you'll need to determine all the expenses that will be associated with it. This can include mortgage payments, maintenance, council rates, insurance, property management fees and utilities, amongst others.
Neglecting the property
Many investors think they have the time, resources and expertise to manage their own property. While this may be true for some, it is not always the case for every investor in the market.
Before going down the road of DIY management, you'll need to ask yourself if you have the time needed to manage your property and your tenants. You'll also need a good understanding of tenancy law and the financial aspects of managing a rental property.
Property managers can be an extremely useful tool for the inexperienced and the under resourced. Although the services come at a cost, you'll have reassurance knowing your home is in very capable hands.