Building a property portfolio is a rewarding and potentially lucrative venture. However, real estate investment is not without risk. Whether you’re an experienced investor or just starting your portfolio, here are the 10 most common mistakes to avoid when you’re investing in a property.
1. Rushing your decision
It’s in your best interest to look at as many properties as possible before committing to an investment. Do your research and see what’s available to ensure you get the best deal for your portfolio goals.
2. Investing in a depreciating market
When house prices are falling and supply exceeds demand, this isn’t good news for investors looking for opportunities. Instead, focus on areas where demand for property is higher than supply.
3. Paying over the odds for the property
If you purchase the investment property at auction, or you become involved in lengthy negotiations, you may end up “attached” to the property and pay more than it’s worth. Remember, this is an investment property–the goal is to make a return.
Never let your emotions cloud your judgment! Buy your property for the right commercial reasons.
4. Underestimating your costs
Buying the property is not the end of the story. You have to prepare it for rental. Always overestimate how much work will cost so you’re sure you have the funds to cover it.
Top tip: Get a range of quotes for a job, and double the most expensive. This ensures you don’t run out of money–which could lead to poorly-completed jobs and angry tenants!
5. Forgetting ancillary expenses
It’s not just repair and refurbishment you should be concerned about. You need enough money to market the property, pay a deposit, cover taxes, handle maintenance costs and pay insurance fees. If you don’t have this cash in reserve, and you can’t secure a tenant immediately, you could encounter unnecessary problems.
6. Ignoring your due diligence
Check the area around the property. Are you buying a property which will appeal to the target demographic? Areas with good transport links, schools, and amenities are great locations to start with.
7. Paying too high a mortgage
This is a property you’re purchasing for commercial gain. Pick a budget and stick to it so you don’t overextend yourself.
8. Not having a down payment
It’s best if you have a solid down payment to put towards a property, rather than purchasing something purely because it’s all you can afford. Although you can buy investment property without putting money down, a down payment now can improve returns down the line.
9. Ignoring your competition
You must understand what other landlords are charging, the condition their properties are in, and how easy it was to secure tenants. Don’t make the mistake of pricing yourself out the market.
10. Doing everything yourself
Property investment is complex, and there are many considerations involved. Investment professionals, realtors, and conveyancers can all help you save money and make the best real estate investments for your portfolio.
For more detailed information on real estate investment and how it can benefit you, download our free ebook, “Investment Properties: How To Get The Best Deal” today.