What are the common mistakes made by beginning property investors?
In today’s show, we’re going to discuss those mistakes and how to avoid them.
This episode is one of two that I recorded with Marc and Sally from Finder.com.au. If you heard last week’s episode, you know that we previously discussed the common mistakes that first-time homebuyers make.
In this session, Mark and Sally asked me about the common mistakes that beginning investors make so that they, as beginning investors, could avoid them.
But there’s a lot of useful information for more experienced investors in our conversation. Listen in to hear the interview, which is followed by today’s mindset message.
How to avoid property investing mistakes
Most property investors are trying to achieve financial independence. But about half of the people who buy an investment property sell up in the first five years. And they often end up selling at a loss, as well. As you can imagine, this does not help in reaching financial independence. Take a look at some common beginning investor mistakes to avoid.
Trying to go it alone
You should be investing as part of a team, not by yourself. Having a property strategist and a buyer’s agent protects you and helps to level the playing field.
Not doing your research
Location does the bulk of the work when it comes to your investment property’s capital growth. You can make so much money from rent – but to grow substantial wealth, you need capital growth.
That means checking data for the location you choose to see how likely the property is to grow in value over the next ten years.
Waiting too long
Timing the market isn’t that important – well-located properties in capital cities tend to double in value every ten years.
Waiting for the “right time” only causes you to lose out on good opportunities.
Buying what you like or want
Remember that when you’re buying an investment property, it needs to appeal to owner-occupiers, because they’re the ones who are going to push up the value.
You also need to consider what tenants want.
But properties that are built to appeal to investors often aren’t the properties that go up in value, because those properties don’t have the same appeal to owner-occupiers and tenants.
Underestimating your running costs
You need to plan for regular costs, like taxes, as well as unexpected costs, like damage to the property. Landlord insurance can cover some costs, like tenants leaving or failing to pay the rent, and insurance on the building can cover things like storm damage.
But you’ll still need to have money set aside for things that aren’t covered by any insurance.
Managing your own property
Property managers keep up with changing legislations that may affect you as an owner, make sure that insurances are current, and generally provide you with an extra layer of protection while ensuring that things run smoothly.
Links and Resources:
Join Michael Yardney and a group of Australia’s leading experts at his annual Property and Economic Market updates – in Sydney, Brisbane, and Melbourne Use the coupon code PODCAST and come as our guest
Some of our favourite quotes from the show:
“There’s two groups of people: some who get in too early, some who get in too late.” – Michael Yardney
“Of the 20 million property investors in Australia, the majority, around 90% never get past their second investment property, which means they never get the financial freedom they’re looking for.” – Michael Yardney
“Smart investors buy themselves time to ride the ups and downs of the cycle.” – Michael Yardney
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