Many investors start with the aim of making it big in the real estate world, however only a handful ever make it past their first investment property. We have helped hundreds of customers buy their first, second, third (and more!) properties, and have a solid understanding of what works in the Australian property market. In this article, we have prepared a list of the four major errors we see first time investors make, and tips on how to avoid them. Learn from our experience, and get in touch to talk about your investment property goals today.
1. Letting emotions influence purchase decisions
Even the most seasoned property investors can be swayed by their own personal preferences such as location or décor. Whilst you may love French-style windows, this feature may simply add expense rather than any return on investment. When buying a home, it makes sense to invest emotions in the purchase as it is a place where you hope to grow memories. However, when it comes to investment your sole purpose should be to gain a return on the initial capital. When searching for an investment property, you need to be clear about what features will help you achieve your target gains. Is the location lucrative for tenants? What extra expenses are required to make it liveable? How has the local market performed in the recent past? Delving into the details will ensure that your first investment property will be a profitable venture.
2. Inadequate Planning
Successful wealth creation, whether it be through property, shares, business investments or other means, requires you to set goals to determine and end-point and then devise a way to get there. Your investment strategy should focus on both the short and the long term, and include a detailed plan showing where you are now and a clear path of how to reach your goal. Undoubtedly, there will be times when your investments don’t perform as planned. Your investment strategy plan should also include contingencies and budget for these situations
3. Poor cash flow management
The costs involved in running a property are often underestimated by first time property investors. At the time of initial purchase, you also need to budget for any repair costs to make the property liveable, government fees and charges, bank fees, stamp duty and other taxes. Once you have tenants, you will be responsible for council rates, water bills and property repairs. Depending on your investment strategy (negative gearing versus positive returns), you will need to ensure that the rental income from the property balances against your income goals. At the same time, you must have cash or liquid assets available to cover any ongoing expenses. We recommend taking the time to sit down and look at your income estimates, then write down any possible expenses that you may incur, no matter how improbable, and work them into your contingency plan.
4. Going it alone
As with all investments, it’s never a great move to rely solely on online research when purchasing an investment property. We have helped hundreds of investors obtain the finance they need to start and grow a property portfolio. With access to numerous lenders, our experts will ensure that your loan structure is aligned to your investment goals whilst keeping your personal assets safe. As discussed above, successful property investments require a sound plan to be successful. Speak to one of our advisers about your property investment goals and start building your lucrative property portfolio today.