Always grab the opportunity to learn from experts – an opportunity that is right in front of you now.
I’m going to take you through the 10 property investment mistakes I’ve made, because I don’t want you to trip over on the way to reaching your goals.
On the go? Here’s 30 seconds of key take outs:
· Avoiding property investment mistakes starts with research from expert sources.
· A smart investment strategy for a busy person is to buy and hold for the best returns.
· A switched-on property investor always has a cash buffer.
· A switched-on property investor also has an expertise buffer – a team of professionals and supporters to help you reach your goals.
Keep reading >>
Property investment mistake #1: paying too much for a property
If you don’t research the locality you’re investing in, you could pay too much. While you might recover this over time, you lose potential cash flow while you catch up. Losing cash flow means having to let opportunities pass by – we call this opportunity cost. You may have to sit in the market a few years to reach market value before you can consider unlocking equity.
Property investment mistake #2: selling too soon
A typical real estate agent may drive a mantra of ‘buy and sell’. An agent may not be a property investor but they do make money from vendors and buyers activity.
If you’re employed doing something you love, you’re in an ideal position for investing in property. The best strategy for someone in this position, who is switched-on and tuned in to want they want their future to look like, is to buy and hold for the greatest returns.
As you move through the investment phases of your life cycle, it may make sense to sell a property to pay down loans to free up cash flow for retirement play money, or for more investment.
Patience is rewarded when you have goals to smash.
Property investment mistake #3: buying a lemon
Just. Don’t. Do. It. If you’re buying an existing property, invest in a full site, building and pest inspection. Structural building problems and costly repairs will chew up any spare cash flow, slow down your portfolio growth and turn you to drink. You’ll end up chasing your tail financially and telling everyone that property investment is a sham – all because you didn’t do your homework.
Property investment mistake #4: buying in an area with poor rental demand
Properties in high vacancy areas can take a long time to lease, affecting your cash flow. While you can’t control fluctuations in vacancy rates, you can monitor it. There are ways to reduce vacancies when rental demand takes a dip. Chat with me here for tips or send a question to #DearMarcus on our Facebook or Twitter pages @CapitalProps and @MarcusWestnedge – so your mates can find out more too.
Property investment mistake #5: employing a poor property manager
Property managers are the critical link between you and your cash flow. Property managers need to have great multi-tasking and negotiation skills. They’re your eyes and ears especially when you are investing from a distance.
Property investment mistake #6: low rental return, high negative gearing
If there is a significant negative gap between the repayments on your investment loan, and the rental return your cash flow will be a challenge. You need cash flow to grow your portfolio.
Property investment mistake #7: shunning expert guidance
Culturally, we’re not great at asking for help from others. As a property investor starting out, you need to leverage the knowledge and experience of professional property investment expertise. There is money at stake, particularly when you start out. An investment in making connections and leveraging knowledge will contribute to a healthy financial return.
Property investment mistake #8: buying where you live
Don’t buy where you live because it is convenient and familiar. Limiting investment to one postcode is a common mistake. Open your mind to the possibilities beyond a personal frame of reference. That’s when you’ll grow.
Property investment mistake #9: waiting, waiting, waiting…to buy
If you wait for the right time to buy a property, you might never find it. I know from experience that there is always going to be a good market to invest in.
If the time isn’t right in one location, it may be right in another one. There are vastly diverse property markets across Australia. Each property market mostly acts independently based on localised economic conditions and property market factors.
Property investment mistake #10: no cash stash for a rainy day
Having access to cash in advance decreases your risk. While an Australian Defence Force job can be a secure gig, you need to be prepared for any change in the property market, the employment market or political stability and economic conditions. You can start your cash stash by putting less of a deposit down initially, to keep cash on hand. I recommend you aim to have four months worth of living expenses set aside as a buffer.
Reverse engineer my mistakes and succeed in the property market
If you pull apart these mistakes you’ll find out why some properties perform better than others. By reversing and then duplicating the learnings from my mistakes, you should get some good results on your property investments.
Sometimes, it takes a shift of thinking. I know for a fact that what I’ve learnt and applied since works when you apply proven investment strategies focused on building an asset base. A healthy asset base is your path to financial independence as a passive income opens up a wealth of lifestyle and career choices.
Free investor tools: 10 Property Investment Mistakes PDF | 30 Page Property Investment Guide