Five Common Mistakes First Time Investors and Home Owners Make
Traditionally, property investment has always been perceived as a highly lucrative venture in Australia. There are several reasons behind this phenomenon, not least being that the population is growing continuously and this has led to an increase in demand for new housing. In the real estate market today, there are a plethora of investment opportunities available with en endless supply of information available at your disposal.
The purpose of real estate investing is to create money and build your wealth. The kind of strategy that one utilises when making investment decisions depends entirely on the outlook of ones investment needs.
Many new investors tend to make mistakes when they are making their first purchase. The sheer enthusiasm of making arguably the biggest investment decision of their lives ends up creating a lot of excitement that effectively clouds their judgment and better sense.
However the following tips will help ensure that you do not make the kind of foolish mistakes that can not only leave you financially insolvent but also effectively stranded with a property that you can not afford to maintain.
Failing to Plan
They saying stands true: ‘if you fail to prepare, be prepared to fail’. If you are wanting to create success through property investing, it is vitally important to understand the road that will lead you there. If you want to be successful, you need to pay detailed attention to the following points:
- Set your goals (consider short and long term aspirations)
- Visualise the end game (its important to know your starting point, but equally as important to know the end. All successful people start with the end in mind)
- Put it all together in a simple plan
Property investing is not as simple as just buying a house, crossing your fingers and hoping that it makes you money. When putting together a plan for building wealth through property, you need to ask yourself several important questions:
- Is this purchase for long term capital growth or short term cashflow?
- Is your goal to build a portfolio so that one day you can retire on the cashflow?
- Have you set up the appropriate buffers to manage your cashflow?
Overspending is a Very Common Problem
This is a very common mistake that people make. The agents and realtors show them the kind of properties they want and they are swept away by their emotions and end up buying something that they can not afford. It is important to engage a specialised mortgage broker who can assess your finance and set up appropriate buffers in place to accomodate the purchase and the unforeseen that may occur.
Purchasing the Wrong Property
Failing to do your research may result in leaving yourself open to making a big investment mistake. Understanding what the area needs in terms of housing is important (e.g buying a one bedroom apartment in an area where the rental market is predominantly families with 3 young children). Information regarding statistics can be found on the Australian Bureau of Statistics (ABS).
Managing the Cashflow Poorly
As a first time investor, one of the biggest traps to fall into is poor cashflow management. One must take into consideration all the expenditures that comes with buying a property such as: settlement costs, conveyancing fees, loan set up fees, property management fees, interest charges, stamp duty and more. It is important to understand the numbers so to make sure you can afford to keep the property even when the unexpected may occur e.g interest rate rise, vacant property etc.
Not Acquiring Topnotch Professional Help
Last but not least, may people in their naïveté do not acquire the services of professionals. If you are really new to the game it may be the best possible option to ask people who have been working in the field for many years for some help. The type of professionals you would be seeking are:
- A buyers agent
- A mortgage broker
- A conveyancer
- A solicitor
- An accountant
- A property manager
If you were to enter this field entirely on your own without any sort of professional help whatsoever, and especially if you are planing to earn a living through your investments it would be deemed advisable to make the best use of the resources by taking expert advice as an when needed.
Wanting to speak with a team of friendly professionals, why not give the team at E-Fishient Property Solutions a call today on 1300 148 417. Our experts are ready to assist you where ever and when ever possible.
Until we meet, we wish you the vert best for your investment success.