People commonly think that investing in property is a foolproof way to make money. However, there are several mistakes that new investors in the real estate market make. Here are the top ten mistakes made my new property investors.
Leading with emotion
Basing your choice of home on what your heart wants instead of what might be an excellent future investment has been the downfall of many investors. Never let your heart rule your head. If you’re going to invest in property, you need to know why you’re buying and what kind of return you want. All this information comes from factual research.
Having a plan
Having a clear plan in place for the future that includes all your investments, where you want to be, and what you want to achieve is critical. Sailing by the seat of your pants and going with the flow is not a successful business formula. Before you take any steps, you must know where you are now and where you want to be. This includes financial planning over a specified period. And don’t be over-optimistic. Anyone can throw together projection but, unless they’re fact-based, they’re mostly meaningless.
Taking it too fast or too slow
No one wants to jump into a huge investment, but it happens all too often; mostly without any real consideration. This is usually done when someone sets their heart on something and is worried they’ll lose it. On the flip side, being way too cautious and indecisive can lose you the perfect investment. Having a firm idea of what you want and not being afraid to go for it is the key to making the correct decisions at the right time for your plan.
Thinking that everything happens overnight
If you go into your investments thinking that it’s a get rich scheme with instant returns, you’re only going to end up disappointed. Investing in property is a long term plan, with lots of ups and downs. The costs involved in buying and selling can be high, and the market can be volatile. Patience and planning are crucial to building a successful portfolio.
Not undertaking the necessary research
Not investigating the market is almost guaranteed to lead to dismal failure. The property market fluctuates wildly and not keeping an eye on this is the sign of a lousy planner. It’s not even just the overall market you need to be aware of. Region fluctuations and local demand also need to be widely researched. This way, before you jump, you have as much knowledge as you need to make the right decision. This is something that can’t happen overnight; it takes time to understand.
Investing in the wrong property
You must ensure that your market knowledge covers changes to areas, housing development plans, local planning law, etc. Thinking you have a great investment property that will make money becomes less attractive when you realise there’s a runway scheduled for the end of the drive. If you want to attract a specific market, you must ensure you’re not buying a property in an area that won’t suit them.
Not getting professional advice
Although you may consider yourself good at budgeting, have you found all the costs that might crop up? Buying and holding on to property might be more expensive than you think. What if your property was to lie vacant for a few months? Do you have the funds to cover this? Always make contingency plans and always employ specialist help when you need it.
Always seek the counsel of a mortgage broker or a professional adviser to help you work out which financing options are most suitable for you. Having the right structure in place from the start can end up saving you money in the long term. It can also stop you making mistakes you didn’t even know you could make.
Research, research, research
Before you dive in any buy a property, are you sure you know everything about it? Do you know why it’s for sale? Are you aware of any potential issues with the house? If the seller is in financial straits, can you negotiate a lower price? There are numerous things to look out for when making the final decision on whether to buy. Figuring these out before investing your money can save you time and money in the long term. Also – always ensure all relevant inspections are completed before you sign anything.
DIY Property Management
When you have a single property, it can seem like a great plan to save yourself money and find your own tenants. When you have ten properties, this can become somewhat of an issue. Even when managing your properties is your full-time job, it can be well worth getting some assistance. The last thing you want is annoyed and frustrated tenants who are hanging around waiting for answers. Unless you’re aware of all the laws and regulations related to renting property, you have the potential to land yourself in a lot of trouble. Finding an experienced property manager can be crucial to success. It also leaves you time to find your next investment.
About the Author
Konstantinos Golias is a Fx trader, writer, and blogger. With 8+ years in finance market, he’s passionate about writing for stock market, real estate and new ways of investing. Konstantinos lives in Greece and writes about investing industry on his blog, financial metro pole