Property investing can be a great way to build wealth over the long term, but there are some traps new investors can fall into. It’s important to approach property investing with a strategic mindset to help you avoid some of the common pitfalls.
Here are five common mistakes investors make and how to avoid them.
Many property investors make the mistake of investing close to home or in an area they are familiar with. While it may seem like the most comfortable option, it’s not always the best one. By only considering properties in local areas, you may miss out on potential opportunities in other states or cities. There are more than 10,000 different suburbs to choose from and the odds that you live in an area that will provide the best long-term growth is low. Cast your net far and wide and identify locations where there is a supply and demand imbalance.
The second common mistake investors make is not doing enough research before investing. Conducting thorough research is crucial to minimise risks and avoid investment mistakes. Investors must analyse the property market, supply and demand trends and local economic factors. Many investors like the idea of buying a property, but stop short of doing any real analysis or due diligence. The first place to start, is by looking at how many listings are currently on the market compared to how many are selling. Look closely at comparable sales in the current area and get a good idea of what a fair price might be. Look to buy the type of property that owner-occupiers want in your chosen location.
Another mistake many investors make is not having a property investment strategy. Without a clear strategy, you are unable to identify your goals, the types of property you want to invest in, and how you plan to achieve them. It is essential to have a clear plan to stay focused and make informed investment decisions. Don’t just think about buying your next property, think about how you can accumulate multiple properties.
Not having a finance plan is a common mistake that many property investors make, in many cases stopping them in their tracks. According to the ATO, 90 per cent of investors own one or two properties. This is normally because they run out of borrowing capacity after those early purchases. By working with a mortgage broker and defining your long-term plan, you can build a strategy that will allow you to grow your portfolio over time and not get bogged down along the way.
The final common mistake investors make is trying to manage their investment properties themselves. Property management can be a time-consuming and complicated process. Property managers have the knowledge and expertise to handle all aspects of property management, including finding tenants, managing rental payments and maintenance issues. While saving a few bucks on management fees might seem appealing, it can lead to costly mistakes, and hiring a property manager can ultimately save investors time, money, and stress.
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*This information is general in nature and does not take into consideration your individual circumstances. Please contact us for further information.