“Why did you buy the property?” Kristen sighed and patted her brother on his back. Nate was speechless. Like most people, investing in a property is one of his main financial goals. And when he was offered an attractive deal with “guaranteed” rental, he took it up without much thinking. Little did he know, he has not been able to rent out his property for more than a year now and neither can he sell it off. However, as Nate was confident that his property can be rented out immediately, he did not account the loan installment into his budget. His monthly income can barely sustain the loan in which Nate has to subsidize from his own savings. Now that his savings have dried up, Nate has no choice but to put his property to auction.
Although property investment is believed to be one of the most secure type of investing, it is still an investment after all. There are many factors to be considered and we will make mistakes along the way, especially beginner investors. But, it’s okay! We’ll always learn from mistakes. Here’s 5 of the most common property investment mistakes that you can avoid.
1) Poor Finance Management
Always project your cash flow. If you only include all the upfront fees you need to purchase a property, do rethink again. Many made mistakes by only projecting the short term cash outflow. What about the future expenses? Building management fees, repair & maintenance cost, mortgage, etc. Otherwise, you will find yourself subsidizing from your own resources.
In addition, it is good to be positive that we will have constant rental income. However, things may not always go as planned. Hence, it is important to set aside a reserve fund to sustain your mortgage in case your property investment suffer a short-term shortfall in rental income.
2) Overborrowing
It is not uncommon for investors to get over-confident when they have acquired multiple properties, sometimes even acquiring a few at once. Do set a safety buffer for yourself and do not be greedy! This is to avoid falling into debt traps in case economy crashes. You do not want to be forced to sell off your property in a short few years after acquiring it. Well, only if you manage to find a buyer. Otherwise, you are only getting yourself into “financial suicide”.
3) Trying to Fix the Property Yourself
Not unless you’re skilled in this area, don’t try fixing things in the property on your own. Although DIY can surely save you a lot of money, you may end up paying much more if anything goes wrong. Know your skill limits and seeking professional help can ensure a smoother process.
4) Decision Making – Too Hasty or Too Hesitant
There are investors who don’t sleep on a deal. They just rush to sign on the dotted line and this “gung-ho” attitude of theirs may get them into trouble. Although sometimes a rushed investment can come good, it is still advisable to do some research and and consider your investment objectives before deciding.
On the other hand, there are some investors who are over cautious. They always have this internal battle in their head and this can go on for hours, days and even years. These investors never stop learning the investment game but, they never play it. Before they know it, someone else has already stepped in and enjoyed the return from a great property investment.
You need to be between these two type of investors. Do not let your emotions overrule the property investment logic as this is a whole different story than buying a home for your own stay.
5) Lack of Solid Research and Due Diligence
When due diligence is not done properly, you may get into huge trouble like Nate. It is important to do solid research about the property, location, developer’s background & previous developments, future developments and more prior to acquiring it. Do check out this article “Inside Secrets: Property Investment” for more tips on property investment.
Do not get attracted to their marketing gimmicks as you know photos can be deceiving. Also, pay attention to the current market and government plans to know if it is a good time to invest or should you wait a little longer. If you are new to property investment, don’t be shy to seek advice from the experts among your network.
Everyone learn from mistakes, but it will cost you much lesser to learn from other people’s mistakes. Avoiding the above common mistakes will help you achieve your investment goals earlier. Good luck! Do click “Inside Secrets: Property Investment” for more tips on property investment.
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