YOUR CALCULATOR OR YOUR HEART?

 

Whether you're new to property investment, or you need a quick refresher course, here are ten things all property investors need to avoid for a successful investment career. 

 

  1. Falling in love with the property

You need to stop thinking like a home owner and start thinking like a business owner.

Yes, you need to like the property. A question you should ask is: Could I live in it myself? If you can, then it's likely someone else can and so the property is probably rentable. It’s a numbers game both income and capital growth.

 

  1. Checking the facts

Due diligence is more than just an inspection of the property. It's also a thorough investigation of your area's rental market — vacancy rates, average rents, average age of the rental stock, zoning, government regulations.

There is more research material available than ever in the history of real estate.

 

  1. Forgetting the home improvement rule

It will always take three times the money and twice as long as you first estimate to get a property ready to rent. Allow for additional funds to pay the mortgage whilst the property is vacant. Obtain a building inspection by a qualified building inspector.

 

  1. No cash reserves

A lack of cash reserves puts unnecessary pressure on you to do sub-standard repairs, accept sub-standard tenants or make other poor decisions because of a fear of vacancy.

When you have a sufficient cash reserve, you act rationally.

 

  1. Doing it all yourself

New investors often attempt to manage it themselves. That approach can end up costing more in the long run. Find an accountant you can talk to, a lender who will work with you, and a reputable real estate agent to find a property in your price bracket.

Get a team together which can also include a valuer and a “property loving” solicitor.

Find a reputable real estate agent and give them the job of managing the property, or should we say investment, and let your accountant look after the legitimate costs of running the property at tax time.

 

  1. Investing blind

Real estate investment risk is directly proportional to knowledge. The more knowledge of investing techniques, financing, acquisition and negotiating, the less risky your investments will be.

 

  1. Investing long-distance

The only time that you would invest interstate is if you have done your due diligence and researched the market in which you intend purchasing and also have a good real estate agent to manage your property in your absence.

Historically most property investors have properties that they can actually drive past.

 

  1. Paying too much

If you're embarrassed to make a low-ball offer to a seller, don't invest in real estate. You never know a seller's circumstances and an offer you think will be unacceptable may be very acceptable to the seller. Have your finance in place and make your contract of sale strong, with a good deposit attached.

 

  1. Not studying the competition

Why does the guy across the street rent his property the same day someone moves out, while yours sits vacant for months?

He might not be very picky about whom he rents to, but he also might have lower rents or have gone to extra effort to present the property.

 

  1. Being underinsured

Insurance on rental property goes beyond insuring the building against fire or natural disaster. You need to look at comprehensive landlord insurance.

There are horror stories about destroyed rental properties where this type of insurance has not been taken out. Most major insurance companies now offer this product, which will not only cover you for damage to the property but also loss of rent.