Property investment is an industry where many people have been able to build their wealth and transforms their lives. It enables people to be their own boss and make investments into a product that is always going to be in demand.
However, successfully making money with an investment property compels you to understand and evaluate the inherent risks. Turning a profit with real estate requires careful planning of a strategy that maximises opportunity and minimises risk.
With that said, let’s examine 5 big mistakes you should avoid when investing in property; by George Markoski from Positive Property Solutions.
1. Trying to ‘flip’ a poor quality property
One of the common property investment mistakes that George Markoski warns his students about is spending a bunch of money on renovating a cheap old house in the hopes of turning a profit. George points out that this behaviour defeats the purpose of investing in property to begin with since you are sinking your own time and money into it before it can start generating a return.
It’s much smarter to enter the market with a higher budget and get a nice new property that you know can be easily rented right away. While it’s not impossible to flip a property for profit, it’s not a risk you really need to take if you are serious about making a return as quickly as possible.
2. Following your heart and not your head
While buying the home you and your family occupy is always an emotional + analytical decision, there’s no need to bring emotions into buying an investment property. You should be purely analytical when buying an investment property and make sure that you have built a solid case the justifies the purchase of that property rather than your other options.
Your personal tastes on what the property looks like aren’t relevant – you should invest in something that you know has appeal for tenants. What might be a negative for you could be a huge plus for potential tenants.
3. Not keeping up to date with the rental market
The rental market tends to move a lot quicker than the property market. Property investors who don’t keep up to date with the rental market can go years without changing the rent rate on their tenants, and when they do eventually realise they need to up the rent it will be by a significant amount that tenants likely won’t be happy with.
It’s better to keep updated with the rental market and increase rent by small amounts, and the best time to do this is when a lease is renewed. This helps keep tenants in the know and avoids them suddenly leaving when you try to increase the rent by $50 or $100 in one go.
4. Not hiring a property manager
While it can be tempting to try and save money on a property manager by doing it all alone, you will quickly wish you had hired one when tenant complaints and other issues fall on your lap. If you are trying to earn a passive income with property investment, you shouldn’t make it your full-time job.
It’s better for you to focus on the big-picture stuff, like expanding your investment portfolio.
5. Not reviewing your financing arrangements
If you want to make the best possible profit as a property investor, you should really review the state of your portfolio and financing arrangements each year to ensure that they are adequate. You may be able to acquire a better deal with a different lender or product package when it comes to your financing.