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07/11/2013

Blog: Top 3 mistakes investors make

Investors

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Many property investors do not think everything through before jumping onto the property ladder –  be aware of the risks you could face so you know what to avoid.

Emotion based buying

Some investors find themselves too emotionally attached to their properties, a mistake that can be evident from day one.

Before you purchase property, ensure that you have done the proper research and can separate the business investment side of being a property investor from your emotions – after all, you won't be the one living in the house.

Not doing research

As an investor, a major concern for you will surround rental yields and the vacancy of your property. To ensure that these risks are reduced, it's best to buy in an area with a steady rate of growth and low vacancies.

You need to be strategic about the purchase rather than just buying a property because it is in a rental "hotspot".

Look at the suburb's track record and history rather than buying into an "up and coming area," alongside everyone else.

There is also no point waiting until the market has perfect conditions as everyone is waiting for the best time to invest.

While you wait for optimum conditions, house prices may increase and you would have wasted time. It is better to purchase when you feel ready to buy.

Bad financial planning

Make sure you can comfortably afford the property and you have enough cash reserves to cover all your costs, including stamp duty.

Don't forget about the ongoing costs such as maintenance, insurance, property management fees, strata, council rates as well as a margin of around 10 per cent for those unexpected expenses.

This is where doing your research comes in handy – if you have worked out the amount you should expect to get in rental returns you can happily calculate how much you can afford to spend.

Insurance is an important item to add to your budget, as it will give you a bit of peace of mind if something were to go wrong, you will have something to fall back on.Both building insurance and landlord insurance are crucial to have if you're an investor.

Book a FREE appointment with a professional mortgage broker now!

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