Many property investors start out, hoping to win big with real estate, but very few will ever get past their first investment.
Lack of research, no plan B if they fail, buying the wrong property…
Here is a short list of pitfalls to avoid when it comes to property investment:
Not enough research and due diligence
Use a service that provides multiple independent sources of price data and suburb information and chat to Local Government to find out about future development plans.
Borrowing without Safety Buffer
Or buying assets in the wrong entity, such as using their personal name instead of a trust.
Buying with your heart, rather than your wallet
Don’t buy a property for its lifestyle benefits rather than its fundamentals.
Stick to your budget and be prepared to walk away from a property if the numbers don’t match.
Don’t get over-confident when you have acquired multiple properties.
Refinancing can become impossible if an investor has borrowed to his or her limit, especially with the tightening in lending restrictions. Interest rates could go up when rents won’t. A long-term mindset is important.
No investment strategy
Think about what stage of life you are at. Often people buy properties because they think that they’re a safe, solid asset class. But in ten years from now, they would probably be investing in their children’s education or thinking of retirement. Always start with the end in mind and consider exit strategies.