Property has long been an incredibly popular investment choice. A lot of people invest in property to set them up for the future. It can provide a second stream of income, and it is a great way to diversify your portfolio if you already have investments. However, you do need to be cautious when making any type of investment, and property is no different. With that being said, read on to discover some of the mistakes you will need to avoid if you want your property investment to be as successful and profitable as possible.
Diving in Too Quickly
It can be very tempting to dive in head first, especially if you have seen a property that you really like. However, there will be many more properties, and it is more important to take the time to make the right decisions. You should never simply run into property investment without doing prior research. You need to research the property market as a whole, as well as carefully doing your homework on every property you consider investing in. You don’t only need to look at the projected yields for the near future, but you need to consider the long-term path as well. Are there any developments in the process that could have an impact on the resale value of your property?
Thinking You Will Save Money by Managing Your Property Yourself
Property management is a critical area of consideration for anyone that chooses to make this type of investment. Nevertheless, it is important to look at the overall picture when it comes to this. It is very easy to say that you are going to manage your new house because it will be cheaper. But, will it? This depends on many different factors, and you will need to make sure you have a substantial emergency fund available should something go wrong. Not only this, but it can end up taking a lot of your time, and you will need to make sure you are available to respond to any issues immediately. By law, there are certain problems that should not be left for more than 24 hours, for example, no hot water or heating during the winter. If you are not able to commit to this, professional property management is a must. It can also give you peace of mind, knowing that you pay a set fee every month and all of the management side of things will be taken care of for you.
Being Less Than Thorough
Anything less than thorough is not good enough. Firstly, do you know why the vendor is selling? This can make a massive difference when it comes to negotiating a good price. You also need to consider factors such as whether the property is liveable from the perspective of a tenant. Carrying out a professional property inspection is a must, and it is also a good idea to view the property at different times of the day so you can get an idea of what it is like at all hours. If you only view the property during the day, you may be disappointed to find that the area is very noisy and rowdy at night. All of this could have been discovered before signing on the dotted line if you had taken the time to view the property in the evening too.
Poor Financial Management
This is where a lot of people go wrong when it comes to property investment. There are so many monetary matters that need to be considered. Firstly, let’s look at the initial investment itself. You are probably aware that there are many costs incorporated with buying a property. Not only do you have the deposit to consider, but also you need to make sure the place is ready for a tenant, and you have legal costs, as well as the cost of advertising the place. This all mounts up. If you do not include all costs in your budget, you are going to find yourself short. Most people recommend adding ten percent to the figure so that you are prepared for everything. Once the property is yours, the financial management has only just begun. You need to have an emergency fund available should anything go wrong with the property, such as a broken boiler. Not only this, but you need to account for the fact that your property may be empty for a month or two if your tenant moves out. You also need to then factor in the costs of advertising the place again and drawing up the contracts.
Speculation Over Patience
A lot of people going into property investment expecting to be rich overnight. Unfortunately, this never happens. Property is a long-term investment, and the sooner you accept this, the better. If you are looking for a quick fix, you are in the wrong type of investment. For short-term gains, it is all about speculation rather than strategic investing, which is never a good route to go down.
Failing to Consider All of Your Options
A lot of people simply invest in the market closest to them because it seems the easiest and most logical option. But is it the option that is going to give you the best returns? You should look into every type of property investment carefully. Don’t only consider options in your county, but look nationwide too. You may even want to consider investing in a property overseas. Of course, all options come with their pros and cons, but it is critical to evaluate everything carefully before you make your final decision so you know you have made the right one. Of course, it may be the case that your local area is the best solution for you, but you won’t know this until you have considered all of the options that are available to you.
You know what they say; if you fail to plan, you plan to fail, and this is most certainly the case when investing in property. It may be an old adage, but never has a truer word been spoken. Your objective is, no doubt, to build a property portfolio that is lucrative. However, if you do this and you don’t have a plan, it is just like getting in the car and driving somewhere out of town with no satellite navigation or map. If you take an incorrect turn – which is pretty much inevitable – you will get lost. The same applies to property investment. You need to set objectives and goals, which determine where you want to end up. You then need to plot out how you are going to get there. Work out what you are aiming to achieve in terms of income. Do you want long-term capital growth or do you want short-term yields? Once you know this, you will then be able to decipher what type of property is going to get you to where you want to be, and this will set you on your way. Without a plan, you are just buying aimlessly, and this is never a good approach.
Heart Over Head
Last but not least, this blog post would not be complete without discussing the matter of going with your heart over your head. This is undoubtedly a mistake that so many people make when they are buying a property. Only about 10 percent of the purchase is based on logic when buying a home, and the rest is based on emotion. This is understandable when you are buying a home, but you are not. You are purchasing an investment – something that is designed to make you money in the future. Because of this, it is essential that all of your purchase is made based on logic – nothing less than 100percentt will do. You are going to be more likely to over-capitalise on your purchase if you allow emotions to get in the way and cloud your vision instead of negotiating the best possible outcome and price in terms of your investment goals. Analytical research should always be the basis of every decision that is made as a property investor. Never let your heart rule your head. Your heart should not even come into it.
Hopefully, you now feel more prepared for your property investment journey. While there is a lot that needs to be taken into consideration, this should help you to ensure that everything runs smoothly and that you do not run into any bigger problems later down the line.