7 Mistakes Commonly Made By Property Investors

7 Mistakes Commonly Made By Property Investors

 

Wondering how to avoid falling in to the traps most investors make? Would you like to know how to avoid losing money and putting yourself at risk when buying a property as an investment?

When it comes to investing in property there is no shortage of information available to help investors navigate their way in order to ensure success. However, there are many common mistakes made by those who are inexperienced, who perhaps are first time buyers or simply haven’t grown up in an environment where investing was a thing.

Most investors start with an intention of doing it right, but only a small percentage actually get past their first investment property and even less will create real wealth in the property world.

Why do you think this is? Maybe they don’t have the knowledge to take the first (or next step), it might be that it’s all too scary or perhaps they simply don’t have someone in their world to show them the ropes.

Purchasing an investment property is usually the second largest financial investment you will make, after your own home. If your car breaks down, you go and see a mechanic… if your power goes off you call an electrician – experts in their field. Here at CPG we specialise in the success of property investors, guiding our clients through the obstacles and challenges which commonly occur when buying property.

To help you, we share the top 7 mistakes commonly made by investors and some tips on how you can overcome these to smash your investing goals out of the park!

7 Mistakes Commonly Made By Property Investors
  1. Buy A Property Close To Home – this happens all the time and we find one of the main reasons people do this is because they are familiar with the area. They know where the local shops are located, how far away the school is etc. Also, they like to be able to drive by it on the weekend. Bad move!

 

  1. Buy With Heart Rather Than Head – when purchasing an investment property always let facts and figures determine your purchase decisions. Leave emotion at the door. Now is not the time to get attached to the colour of the tiles – the white ones won’t get you any more rent than the cream ones. Rather, you should be focussing on the bottom line and how much the property will put in your pocket each week. After all, each extra dollar spent is a dollar out of your pocket.

 

  1. Ask A Real Estate Agent For Advice – they work on behalf of the seller so have their best interests at heart, rather than yours. You will only get answers that favour them because they really want to sell you something. Contrary to the image a property investor might conjure up, in reality the residential investment market is dominated by people who have brought their own home, and then decide to purchase an investment property using the equity in their home. These investors own 83 per cent of all investment properties.

 

  1. Have The Wrong Financial Structure – this is one of the most important components when borrowing to purchase an investment property and often not done correctly. It’s key to use a different bank than the one you have your home with and often it’s best to focus on paying off your home loan debt first, rather than investment debt. See more in our recent blog and if you need a connection to a great broker speak with our team – How To Be Smarter Than The Banks When Investing In Property.

 

  1. Wait For The Deal Of A Lifetime – progress is better than perfection. There will always be a better deal. Don’t get caught up in believing the grass is greener! Procrastination kills all deals so understand the numbers, do your research and move forward. The longer you wait the more you will pay. Simple.

 

  1. Not Diversifying Your Portfolio – don’t put all your eggs in one basket. Diversification is a way to avoid overexposure and having a portfolio made up of properties in different locations helps protect you against volatility and land tax implications. Also different areas grow at different times, depending on where they are in the property cycle. Savvy investors understand to follow the boom and buy in a market which has seen a little growth and ride out the boom. Do not buy at the top as you pay too much. As an example, you wouldn’t buy in Sydney today because they’ve had substantial growth and are now coming off the boil.

 

  1. Remember The Tax – since the 2017 Federal Budget, the denial of capital allowances (depreciation) on second-hand plant & equipment in investment properties, has significantly affected the desirability of established properties. Understanding the deductible amounts on a property helps you understand the full cash flow picture and often when comparing the numbers newly built properties far outweigh the benefits of buying old.

 

The Bottom Line

If you have the money to invest and remember to avoid these common beginner mistakes you will have more chance of being successful in your property endeavours. Getting a good return on your investment is key to getting you closer to your financial goals.

Data from RP Data and the Census Data from 2011 show that 7.9% of Australians or 1,764,924 people owned an investment property. The numbers are growing as more and more Aussies are realising that retiring on the pension and surviving, rather than thriving is not a way to live life. Why struggle when you can create something for yourself which will allow you to have choices?

Here at CPG we encourage clients to create a small property portfolio for themselves so they can make decisions later in life based on whether they’d like to do something rather than if they can afford to do something.

We’d love to help you get a better understanding of what things you should avoid when considering purchasing an investment property. Together we can take the steps to help you achieve success. Get in touch today.

Read More:

What 95% of property investors get wrong – http://curtispropertygroup.com.au/95-property-investors-get-wrong/

What does the perfect investment property look like – http://curtispropertygroup.com.au/what-does-the-perfect-investment-property-look-like/

Why now is a good time to invest in property – http://curtispropertygroup.com.au/why-now-is-a-good-time-to-invest-in-property/


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