Property investment is a great way to save for the future and make the most out of your money. However, many novice property investors can make mistakes, which leave them in difficult circumstances.
Common Property Investment Mistakes to Avoid
If you are looking to become a property investor or you already are, these common mistakes are important to bear in mind and avoid at all costs.
Lack of Due Diligence
Due diligence is important when it comes to property investment. Many first-time investors rush a decision to buy without making sure they can make the payments or without ensuring that the property is a profitable option.
Property investment experts like RW Invest have an extensive due diligence process to ensure investors can commit to the investment they are making. Ensuring cash flow, making sure you’re buying the right property and factoring in any relevant information before you invest in a property are all part of due diligence.
Emotional Decision Making
When it comes to property, there can be a level of emotional attachment involved in buying and selling homes. However, numerous property investors who are unsuccessful have gone with their heart rather than head and regretted it.
No matter how much you like a property, if it doesn’t make money it is not a good investment and it is better to walk away. Property is one of the most expensive purchases you will ever make and being emotional about this huge commitment is unwise.
Being objective and looking at the facts is the best way to avoid making this mistake. Be sure to read further at residencestyle.com!
Rushing the Numbers
Numbers are the backbone of property investment and it’s essential you get them right. Some property investors fail to factor in service charges and tax when they do the numbers for their property and this can eat away a profit margin easily, turning the property into a loss maker.
Simple errors like missing off a zero or miscalculating the stamp duty can jeopardise an investment’s potential for profit. Look at the maintenance costs that are involved with the property too.
When you consider older properties that will need a new boiler, rewiring or insulation in a couple of years, you need to factor this into your calculations too. Taking time to calculate gross yield, net yield and return on investment is essential before you make an investment.
Waiting too Long
As much as caution and planning are important, one recurring property investment mistake is waiting too long before investing. Lucrative investment opportunities, such as off plan properties, city center apartments and houses in great student areas are hard to come by and are often snapped up by other investors.
Plenty of property investors who have waited too long for a property have missed out on huge capital appreciation and a great investment. If one of the reasons you’re in limbo is because you’ve got nowhere to keep all your possessions if you do manage to sell an existing property, then you might want to consider using a Secure Storage unit.
Not Having a Back Up Plan
Property investors who fail to plan are often stuck in difficult situations without the financial buffers they need. No one wants to be in a situation where they can’t make payments, so it’s important to have a backup plan and an amount of money set aside to cover any future problems.
Making sure rental income covers all costs is an important way to avoid this property investment mistake. Planning for the future and developing a property investment business plan with backup plans included is the best way to avoid this.
Good planning also includes ensuring you have the relevant insurance in place and you are aware of how different attorneys, for example the Case Strategies Group, can support you if you are to lose the property due to extreme circumstances.
Having the correct income in place and making sure you are meeting payments is vital, but if you do not have the support if something goes wrong, then your back up plan was nowhere near being sufficient.