Investing in property can be a minefield to navigate, and the consequences of getting it wrong are significant. Here are 5 mistakes you need to avoid if you are going to build a successful property portfolio.
- Paralysis by analysis
The difference between a property investor and a property speculator is the investor does their research, gets the facts, and makes a decision. So many people, especially property speculators, spend months, if not years analysing the market and they become paralysed by all the analysis they have done. Don’t fall into the trap of over analysing the market that you fail to make a decision.
- Falling in love with the property
Don’t think like a home owner where you think about how you are going to spend years on your back deck, overlooking the pool, creating memories with your family. When it comes to buying an investment property, you need to separate the heart from the head. When you buy shares in a company, you don’t care about the location of their office, the colour of the carpet or how you are going to sleep there at night time. It’s all about the numbers. And it’s the same for property. Make sure the numbers add up – and if you like it yourself, that’s a bonus.
- Missing the tax benefits
So many people invest in property without understanding how negative gearing works. When buying an older property, not only will you have a lot of ongoing repairs and maintenance to do, you will also miss out on the tax benefits that come with a new property where you can maximise the depreciation benefits, and minimise stamp duty. A new property will allow you to minimise the repairs and maintenance you must do on the property, but maximise the tax savings you can make because of depreciation on the building, fixtures and fittings.
- Not understanding the market
You’ve heard of the herd mentality? In property, the herd mentality will usually end in disaster. Just because ‘everyone else’ is heading there, doesn’t mean that you should. Do your research, and make sure you understand the market and make sure the fundamentals are right – considering property values, infrastructure projects, transport hubs, schools, demographics of the area and understanding the rental market in the area is critical.
You also need to understand what the market is demanding in an area. Does the area attract families, are they professionals, so wanting a higher finish on the house, is it mainly an area for investors or are the homes primarily owner occupiers? You need to understand your competition in the rental and property sale market.
- Doing it all yourself
New, and sometimes seasoned investors often attempt to manage it themselves. That approach can end up costing more in the long run. Build your independent team, including your accountant, financier, solicitor and investment property specialist who can all help you make the right decision that will benefit you in the long run. Remember, your success is their success.
Now is a great time to be review your investment strategy. We have had some exciting opportunities for clients in recent months, and we would love to sit down with you and look over your strategy, and help you get into your next property.
If you’d like to chat, click here to get in touch – the coffee is on us.