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5 Real Estate Mistakes Property Investors Should Avoid

11-Oct-2017
Australia’s love affair with property investment has continued over the last decade and with historically low interest rates a steady feature of the investment landscape, real estate investing looks set to continue to dominate the nation's investing preferences.

Investors who are new to property investing can hinder their progress by making some basic mistakes. Getting started in real estate is a lot easier, though, when you avoid these five common mistakes new real estate investors tend to make.

#1 – Not Doing Enough Research

Your first adventure into property investing is inspiring and exciting. Sometimes, however, in all the excitement of finally living your dreams and starting a property portfolio, it is common to overlook researching your first property acquisition.

It is essential to do due diligence on the property to make sure its quality matches the value of the money you will invest to own it. Pest and building inspections are a must-have so you are not caught out by nasty surprises. Checking the zoning is a good idea too, so you can be sure the property can be used for the purposes your tenants are most likely wanting to rent it for. It is also worthwhile finding out if your property is likely to have its zoning and conditions of use changed.

An important aspect of researching a candidate property is the location. Is it ideal for the people who you want to rent the property? And looking to the long-term, does the location suit a potential future buyer? Access to public transport, shopping, and recreational facilities are all important things to find out about your property before purchasing. They can be a deciding factor for possible tenants and future buyers.

#2 – Structuring the Financial Part of Owning an Investment Property

There are so many things to consider when it comes to choosing the right structure for your property. Getting the best advice you can about the right kind of loan facility, legal ownership structure, and tax and financial planning is essential to your future property investment success. In many cases, these questions can have complex answers and it is best to consult experts to ensure you are establishing your real estate investing future on solid foundations.

#3 – Trying to do Everything on Your Own

Following on from the suggestion in #2, embarking on your property investment journey alone, without any help from professionals who can give you time-saving, as well as money-saving advice is a sure way to land yourself in trouble – if not immediately then certainly in the future. Mortgage brokers, pest and building inspectors, solicitors and conveyancers, and expert property managers can all help you achieve the best possible outcome for your real estate investment while avoiding some of the pain you could experience when things go wrong.

#4 – Paying too Much

Speak to anyone who has been succeeding with property for a long time and they will tell you when it comes to property investing, the money is made in the buying rather than the selling. It is absolutely imperative that you don’t pay too much for your property. In the joy and excitement of finally getting your chance to become a real estate investor, it is too easy to pay more than a fair price. The price you pay affects how much you can afford to let the property for, its competitiveness in the local rental market, and your rate of return throughout the property’s life. In turn, this impacts your cash-flow and can lead to you being unable to achieve your property investment goals. Buying right, from the start of your investor journey, is a key to real estate investing success.

#5 – Factor-in Property Expenses

Other things that can affect your investment property’s cash flow are the expenses that come with owning an investment property. Many first-time property investors don’t adequately identify and plan for the ongoing expenses of property ownership. Rates, a larger portion of the water bill, maintenance and repairs, insurance and tax compliance costs are just some of the costs to consider. Acquisition, management and re-marketing costs also need to be considered.

Some investors, for example, keep around 1% of the home’s value aside for ongoing costs of ownership. Another way this can be approached is to arrange with your property manager to schedule repairs and maintenance, and then set aside funds from the rental income you receive to cover these expenses. Whichever way you approach it, being prepared in advance will ensure you achieve the best results possible.

Are you considering becoming a real estate investor? The journey ahead is an exciting one! 1on1 Property’s team of property experts can give you a wealth of advice to help you better understand what you’re facing in the months ahead. Call us on 02 4014 1900.



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