Property investing is a different game than buying a home. It requires a different mindset and different criteria. The rewards can pay off big time, but there are some mistakes that investors make that you need to avoid.
Buying with the home owners mindset. You’re not going to live in this home. You’re buying it for someone else to live in, so switch your thinking to them. What will they want from their home? Who is your target market? If you’re buying a home suitable for families, check out the local parks, schools and shopping centres. If you’re buying an inner city apartment, you’ll probably be renting to millennials who want convenience. How close is it to public transport, entertainment, restaurants, shops? Take the emotion out of it and invest with your target market in mind.
- Not paying enough attention to the numbers. You need to know how much this property will cost you each month with a tenant and without a tenant. How many weeks or months could you survive without a tenant? What’s the rental demand in the neighbourhood? What the average vacancy period for similar properties? How much will your loan repayments be if your interest rate goes up one per cent? Two per cent? Will you still be able to afford it then? Pay attention to your numbers. Run a few scenarios and make sure your finances are robust enough to survive the rocky parts.
- Focussing your property search in your local neighbourhood. Whilst you know your local area, it may not be the best place to buy an investment property. Check what’s going on around the country, research different markets, look to where there is infrastructure investment and research properties in that neighbourhood. Seek advice of experts if you feel out of your comfort zone.
- Wanting short term gain. For the vast majority of us, property investing is a long term wealth creation strategy. Some people make a living flipping properties, but they’re few and far between. Take the short term gains when they come, but don’t panic about the short term losses. Take a long term view and ride out the peaks and troughs.
- Set and forget when it comes to property management. Some property managers are great. Some aren’t. Actively manage your property. Look at the reports sent to you by your property manager. Make sure the rent is in line with the market. Make sure the manager is looking after your tenant. It’s been proven that happy tenants stay longer and look after the property better – so keep them happy. Take an interest!
- Not having a strategy. You need to have a strategy! What’s the goal? What’s the purpose of it all? What’s your timeframe? How long until you buy your next property? What’s your exit strategy? This about it and have a plan. Then stick to your plan.
- Being too scared to invest. Investing in property is scary. Being too scared to take action on your dream is sad. Get knowledgeable, seek information, find expert support – do whatever it takes to help you have the confidence to make the move. Don’t be paralysed by fear – or waiting for the perfect moment. Sometimes you need to create those perfect moments and seek them out.
Investing in property is serious business with serious implications. Put the time and effort into getting it right from the beginning.
If you need expert support, let me know. I have a whole team of trusted professionals all ready to help.