People don’t often become investors in property with a plan to lose money, but unfortunately that is a more common occurrence than you might think. Experts suggest that there are a number of common mistakes that particularly first time investors make which can easily be avoided with a little forethought and good advice.
Property experts suggest that one of the biggest mistakes property investors can make is not carrying out proper due diligence on their potential purchases. This can mean not having the necessary checks completed – including a reliable valuation – which can mean that you end up paying too much for an existing property and put yourself behind from the very beginning. If, on the other hand, you are looking at off the plan property to invest in, a good plan is to do your homework and talk to the developers as well as property management experts. By the time you come to buy an off the plan property, you should know the potential value of your property once it is completed, as well as other valuable information such as the potential rental income you might make.
Another costly mistake can be not having a strategic plan in place before you become a property investor or before you think of building your property portfolio. Having a written plan – which includes your goals over the next 3 to 5 years – will help you to keep on track when you’re uncertain or to change your tactics if something unexpected crops up. If you’re buying off the plan property, your investment strategy should also include your strategy for when the property is completed, or even if you plan to sell your property share to another investor before its completion date.
One mistake that first time property investors make more than all the rest is what we’ll call “emotional purchasing”. This means that, despite their best intentions, they will see and fall in love with a property and buy it. This might happen even if the potential capital growth or income from the property does not seem to be ideal, or the property needs substantial renovation. Even if the first time buyers are cool-headed and believe that they are buying a sensible property, they may end up worse off over the long-run because of the ongoing maintenance and repair bills they are likely to be paying well into the future.
One of the best property investment strategies as a first time investor is to avoid the issues associated with existing houses, townhouses and apartments, and look instead at brand new off the plan properties. Doing due diligence on off the plan property means looking at a range of factors including viewing the building plans (and, if possible, viewing a display apartment), design options, looking at the developer’s past builds and reviewing their contractual terms. Off the plan property professionals such as Ironfish provide guidance and help with the type of appropriate due diligence needed for buying new property as well as other practical matters such as choosing the right property in the right suburb that will most likely give you the returns and capital growth you are looking for.