Common Property Investment Mistakes
Property investment mistakes are more common these days,
as more and more people try and cash in on the strength of the property market.
Although from the outside it seems that investing in property is easy, there
are many property investment mistakes that can be made. Here are some common property
investment mistakes, and how to avoid them:
Getting emotional
Property investment mistakes start when you treat the
investment more like your own home than a business. Falling in love with a
house or apartment is one of the most common property investment mistakes. Try
and remain objective, and if you are going to get excited, get excited about
the deal, not the house itself.
Not carrying out research
If there is one important piece of investment property
advice, it is to do your research. Not only must you carry out a full survey of
the property you are going to buy, but fully research the market before even
looking at properties. Too many people make property investment mistakes by not
looking at where they are buying, and what the market is like. Things you need
to look at are:
- What are the
vacancy rates and average rents for comparable units?
- What is the
neighbourhood like in terms of amenities and safety?
- Are there any new
rental complexes being built nearby?
Forgetting the cost of home improvements
Many people make
investment property mistakes because they underestimate the time and costs of
getting the property ready. It always takes much longer and costs a lot more
than you first think. You need to allow for this in your budget, or you will
find yourself short of money to get the property to the correct standard.
Expecting low mortgage rates
Many people
think that they can take advantage of the low mortgage rates that they see
advertised everywhere. However, most of these mortgages are for owner-occupied
homes. The rates for investment property mortgages are generally higher, and
unless your credit is good then you might not get one. To avoid this, get your
finances in order before you look at properties, and know exactly how much you
can afford.
Not properly screening tenants
Although it might seem tempting to take the money of the
first candidate who shows an interest in your property, this can lead to all
kinds of property investment mistakes. Picking a tenant without carrying out
the proper credit and legal checks can leave you with massive bills because you
have to evict them. Always carry out the property checks, as it will save you
time and money in the future and ensure you get your rent money and that the
property remains in good condition.
Investing long distance
One of the investment property basics is to make sure you
invest close to home. Unless the rental property is in a place you visit
regularly, make sure the property is close to you. Otherwise you will end up
losing money through having to travel there, or having to pay someone else to
carry out repairs and manage the property in your absence.
Paying too much
The reason a lot of people fail in property investment is
that they pay too much for the property. This is usually because they are not
confident enough to make a very low offer to the seller. You must remember that
the lower the price you get, the more profit you can make from rent. If you pay
too much then you will have to either charge a very high rent that will deter
tenants, or you will not make money from your rental.
Not having adequate insurance
When renting out a property, you have to think beyond the
normal level of insurance you would get for your own home. Property investment
mistakes occur when you do not have adequate insurance. You have to remember
that if something happened to a resident, such as an accident or crime, they
might blame you for it, and if you do not have the correct insurance you will
end up with large legal bills.
Breaking the rules
All landlords will have their own set of rules, and this
is a good thing. However, one of the most common property investment mistakes
is when landlords break their own rules. For example, if you say no pets but
then allow a pet because it seems well trained, or letting tenants get away
with late rent. If you keep breaking your own rules, you will not be able to
enforce them if things get worse. Make sure you always stick to the rules that
you set for yourself, and you will avoid a lot of property investment mistakes.