Investing in property can be an excellent way to create long-term wealth. However, new investors can fall into traps that may hinder their success. To avoid common pitfalls, it is crucial to approach property investing with a strategic mindset. Here are five of the most common mistakes made by investors and tips on how to avoid them.
Investing Close to Home:
One mistake many property investors make is investing in areas they are familiar with or close to home. While it may seem comfortable and convenient, this approach can limit potential opportunities. It is essential to cast a wide net and consider locations that have a supply and demand imbalance. With more than 10,000 suburbs to choose from, it is unlikely that your local area will provide the best long-term growth.
Not Doing Enough Research:
Another common mistake is not conducting enough research before investing. To minimize risks and avoid investment mistakes, it is crucial to analyze the property market, supply and demand trends, and local economic factors. Investors should start by looking at the number of listings on the market compared to how many are selling. Additionally, researching comparable sales in the area can provide a good idea of what a fair price might be. It is also important to purchase the type of property that owner-occupiers desire in the chosen location.
No Property Investment Strategy:
Many investors make the mistake of not having a property investment strategy. Without a clear plan, it is difficult to identify goals, the types of properties to invest in, and how to achieve them. Having a clear strategy can help stay focused and make informed investment decisions. Investors should think about how they can accumulate multiple properties rather than just their next purchase.
Not Having a Finance Plan:
Not having a finance plan is a common mistake that can hinder an investor’s success. According to the ATO, 90% of investors own one or two properties, primarily due to a lack of borrowing capacity. Working with a mortgage broker and defining a long-term plan can help build a strategy to grow a portfolio over time.
Trying to Manage It Yourself:
Finally, attempting to manage investment properties independently can lead to costly mistakes. Property management can be a time-consuming and complicated process, and property managers have the knowledge and expertise to handle all aspects of property management. While saving on management fees may seem appealing, hiring a property manager can ultimately save investors time, money, and stress.
Property investing can provide an excellent opportunity for long-term wealth creation. However, investors must avoid common pitfalls by approaching property investing with a strategic mindset. By avoiding mistakes such as investing close to home, not doing enough research, not having a property investment strategy, not having a finance plan, and trying to manage properties independently, investors can make informed decisions and build a successful property portfolio.
If you are interested in property investment, talk to us today. We can help you research, understand your options and borrowing power and even connect you with a financial advisor if you need some extra players on your advice team.