Investing in property could make you rich, but it could also lose you money if you don’t do it right. Property investor and Results Mentoring Program director and coach Brendan Kelly reveals his top five costliest mistakes
you need to avoid when thinking of investing in property.
Mistake #1 - Not completing due diligence
Failing to complete due diligence when buying could cost you thousands in terms of maintenance down the line. If you don’t get the correct valuation, you could also run the risk of paying too much for the property.
“Sometimes investors also fall into the trap of buying quickly as a result of limited time,” explains Kelly.
“If you feel the need to get into property and your life is already full, this will increase risk because of competing obligations.”
Mistake #2 - Buying sight unseen
Some experts advocate buying sight unseen and while many investors have been successful without travelling to the location of their potential investment property, this is a risky way to buy– especially in mining towns or remote locations.
“Buying sight unseen means you don’t see the neighbourhood you buy into and instead are reliant upon photos which are designed to put the property in its best frame,” says Kelly.
For a small cost of airfare and a bit of your time, you’d save yourself sleepless nights and hundreds of thousands of dollars by physically inspecting your potential investment.
Mistake #3 – Not having a plan before you start
Not having a plan have many consequences including getting stuck on just one or two properties, not getting the maximum return on your investment and at worst, losing time and money.
Before you start you need to know what you want to achieve and a concise plan, written down on how to make it happen.
You also need to be clear about your strategy. Do you want to renovate then sell the property for quick profit? Or would you prefer a buy and hold property to achieve capital gain?
If you don’t know what you want to achieve, you may achieve a nightmare.
“Buying first then crating the ‘what to do with it’ after is a recipe for disaster,” says Ke.
“This can result in paying too much, increasing holding costs, and the burden of having to cover the monthly shortfall with negatively gearing. It also erodes profitability if you are looking to sell after adding some value through renovating. This could all add up to netting a loss.”
Mistake #5 - Buying on emotion
There is a time and a place for falling in love, but it is definitely not at a property inspection. Becoming emotionally attached to a house that ‘must be the best investment property ever’ will inevitably result in paying too much, usually little to no due diligence, and a leap of faith that ‘she’ll be right mate!’
“Thinking that just because this is a property you love, that everyone else will love it too is a big mistake,” says Kelly.
As a mentor to many potential and experienced property investors, Brendan has seen his fair share of mistakes - many that lead to regret and lost profit. He says most of these mistakes can be avoided by taking your time and doing things right.
Below is Brendan Kelly's list of things to avoid:
|Brendan Kelly's list of Property Investment Don'ts
|1. Don’t jump in without a solid knowledge of the area
|2. Don’t change your mind halfway through
|3. Don’t buy without first reading the market
|4. Don’t settle without doing the final inspection
|5. Don’t believe real estate estimations – get your own valuation
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