Becoming a property investor isn’t a decision that should be taken lightly. Any property purchase involved taking on risks. However, once you’ve made the decision to take the leap into the property market, there are things you should be aware of so you can avoid the most common mistakes.
1. It’s not get-rich-quick
Investing in property is not a get-rich-quick scheme. Building capital gains on property is a long-term strategy over many years. Not all markets grow in value rapidly and often fluctuate in the short and medium term.
It’s important to focus on buying properties with the view to build wealth slowly and sustainably. The costs of buying and selling property make it unrealistic to expect gains within a matter of months.
If you take an appropriate amount of time to buy a property that has real value and potential, plus patience, you will set yourself up for success.
2. Over exposure
Taking on too much risk can lead to ruin. It’s so important to speak with a professional mortgage broker to make sure you can afford the loan for the investment property, including the fees, repayments and maintenance costs.
Some lenders can try to trick you into making you take on more debt than you can handle. It’s important to consider if a property will be cash flow positive and, if not, you can afford the repayments.
Also, you need to have a safety buffer in place in case you need to carry our urgent repairs on the property.
3. Emotional decision-making
Investing should be fact based. Buying a property because you like the layout or the street name is appealing are not reasons to take on a property. You need to focus on those paying rent and the potential resale value of the property in 5, 10 or 20 years time.
Consider the local infrastructure, transport, plans for redevelopment and council laws.
4. Lack of planning
Like any property purchase, it’s wise to save up a solid deposit to avoid taking on too much debt. Proving to the bank (and yourself) that you can be disciplined in saving money for a deposit is a great way to get in the habits needed to investment property ownership.
If you think you’re ready to dip your toe into the investment property market, contact us today for a review of your finances.