While Australian property presents itself as a lucrative, retirement-securing investment strategy, first purchases are generally the confirmation that this may not be the walk in the park you hoped for.
Deciding what to buy and calculating growth trends are just the iceberg’s tip when it comes to researching and purchasing an investment property.
Here are five mistakes both rookie and veteran property investors make and how to avoid a disastrous start to the pursuit.
1. Skimping on the research
Lack of proper research such as studying growth rates, suburb trends and plans, demographics, locations and amenities is inconceivably one of the most detrimental mistakes investors make.
With the amount of property data easily accessible online today, it’s incredible to think how common it is for investors to contribute their laziness onto their research and calculations.
Ensure what you intend to purchase matches your future goals by sifting through every possible source of information as getting it right from the beginning can save you monumental headaches down the track.
2. Buying where they live
Just because you’ve lived in a particular suburb or neighbourhood your entire life, it doesn’t necessarily mean the area’s value is projected to skyrocket in years to come.
Making convenience a priority when purchasing property combined with assumptions that it can be more easily managed is the perfect recipe for investment failure.
Property investment and your decision making should never be associated with or influenced by emotion. Treat it as a business with one primary purpose of generating you a profit, rather than allowing feelings of sentiment to take over.
3. Not consulting the right people
Experienced investors possess a world of first-hand knowledge and should be your starting point with any investment strategy.
All too often will aspiring investors proceed with a purchase with half an understanding of what they’re involving themselves in.
Taking the time to consult the professionals is well worth it in the long run allowing you to be 100% confident when signing that contract of sale.
In addition to acquiring advice on a one-time investment, it’s always wise to seek information on how to build upon a future portfolio and how what you purchase can impact those goals later on.
4. Attempting to self-manage the property
Applying to both first timers and experienced investors, endeavouring to take on property management can be a slippery slope. Things can go very wrong, very quickly if you’re not experienced or are uncertain how property laws and regulations work.
Not only do you not know what to keep an eye out for, but you’ll also have to wear the costs, time and frustration of dealing with the day-to-day of property management.
It’s a time-consuming job and is almost always more cost-efficient and worth the extra cash to appoint a dedicated agent to manage your property.
5. Underestimating ownership costs
Many investors believe they’ll save a deposit, purchase a property and then they’re set. However, this is most definitely not the case and a mentality along these lines will ensure that you’re in for quite an alarming surprise.
Property investment realistically requires you to have at least some sort of ‘buffer’ saved as unexpected costs arise more frequently than you might think.
Although you might be capable of affording purchasing expenses like a deposit, stamp duty, fees and other initial costs, you need to factor in the on-goings as well.
- Can you afford the property to sit vacant for a month if need be?
- What if a major plumbing issue requires repair?
- Are you able to cover body corporate payments?
These are the investment fundamentals you need to account for prior to applying for any loans or even inspecting a property!