The 6 biggest mistakes property investors make
1. Thinking you can only buy property where you live.
When you buy properties in areas you know, or in which you have already invested, you may feel more confident that they will perform well. And it could very well turn out that way! But by having all your properties in one basket (or all properties in one area) you run a few risks:
a) if the market is flat in that area, then all properties within that area will perform poorly
b) you could miss out on an investment beyond your local area that could perform better.
Broaden your scope and assess all the property options out there that suit your property goals.
2. Investing without cash buffers in your life.
Managing your properties with a slim cash buffer may have been feasible in the past, but times have changed, and cash buffers have become a necessity. To deal with inflation spikes, sudden maintenance needs, and unexpected tenant departures, you need a cash buffer. There’s no magic number as to how much should be in your emergency fund but if you’re a smart property investor you’ll know how much it costs for you to keep your properties! Be prepared by storing up several months' worth of costs. The more the merrier! Make sure you have a safety net to manage your costs so you don’t have to sell your property because of tight cash flow.
3. Being too emotionally invested.
Oooo this one can sting. Investing in real estate should be treated like a business, not as a personal endeavour. Keep the property managed and maintained, don’t get too attached to the paint colour, and keep it up and running for your tenants. Although emotions are important, they can cloud our perception of property decisions and interfere with our efforts to build wealth. Keep a healthy distance from your properties so you’re focused on the numbers, not the feelings.
4. Not having a long term plan.
Investing in real estate should always involve a long-term strategy. It changes your approach to everything involved in owning your portfolio - all practical moves draw down from your strategy. Buying and selling property on a whim without a long-term plan will cost you money and not produce the best results. There’s too much room for regretful purchases and poor choices! Property is a long game - buy and hold according to a rock-solid plan.
5. Buying for the wrong reasons.
Many investors buy a property solely because of things like first home buyer grants, then once that timeframe is complete flip the property to an investment. While it sounds like a smart move, it’s buying for the wrong reasons. It’s like buying a new shirt you hadn’t planned on buying, just because it’s on sale - if you didn’t want or need the shirt, the discount is not reason enough to spend your money! Buy according to your long term strategy - if this property fits into your long-term game plan, go for it! Check your motives before pressing go.
6. Investing without a trusted friend or mentor in your corner.
The value of someone experienced in property investing cannot be overstated. By having someone in your corner to run ideas and options by, you gain perspective - often a perspective you haven’t considered before. Find someone ahead of you in the property investment game and tee up some chats to walk through your strategy, practical choices and learn from their experience.
