Three mistakes beginner property investors make

Property investment takes time to master

Property investment takes time to master

From the outside, few things appear simpler than purchasing a property and renting it out. But numerous mistakes can be made before, during, and after the investment purchase. These can cost an investor dearly.

Biggest mistake number 1: Being overoptimistic

When a property investment opportunity is being evaluated, an investor should not be overoptimistic. It is important to have a hard look at the potential downside, both in terms of the property market, and the property itself. Have a sober look at where our economy is heading, what the risks are to house price growth, and whether interest rate hikes are expected and be realistic about the property itself. For example, it might have defects that you are not aware of (perhaps think about using a home inspection service). Don’t be overoptimistic about cash flow. Make provision for “unforeseen events” such as higher than expected maintenance (the plumbing may need attention, a roof may develop a leak etc.) and the tenant unexpectedly vacating the premises. Financially, these occurrences can be expensive. If your cash flow is already under pressure, challenges such as these can create serious problems.

The key learning here is to be conservative in your projections of the property’s income.  At the same time, consider the cash flow implications should anything untoward happen with the property. Ensure that you have the funds available to see you through tough times.

Biggest mistake number 2:  Pride before the fall

Many beginner property investors believe that the reason for their success is their property investment skills. Most beginners enter the market during boom times, and it is likely that their success has to do with market conditions, rather than with their own investment genius. Many tend to overextend their resources by purchasing too many properties too quickly, and any unexpected turn of events can cause serious cash flow problems. Experienced property investors build up cash reserves over time, ensuring that they have the resources they may need to overcome the inevitable up and downturns in the market.

Biggest mistake number 3:  Not getting out there

Today’s technology facilitates desktop research. Whilst this is very valuable in understanding the property market and current trends, nothing beats the knowledge that can be gleaned by tramping the streets. Not only do you get first-hand information about which properties are for sale and at what prices, but “being out there” allows you to develop and use your gut-feel, which is a very important part of any purchase. You can inspect aspects such as the structure of the property, see the quality of finishes, and even see what interest there is from prospective buyers.

As YDL Property Investment will say time and again, property investment is not a get-rich-quick scheme. It takes knowledge and patience to build a portfolio that genuinely delivers wealth. Given the cost of property and therefore the amount that is at risk, wouldn’t it be preferable to avoid these mistakes alltogether, or to minimise them as much as possible, and to invest safely though property professionals?  When you are ready to make this move, contact YDL Property Investment.