When it comes to buying an investment property, experts agree that the key is be informed. But it’s just as important to do your own research. Here is five most common property investment mistakes.
1. Poor financial structures
This includes investors taking interest-only loans without a safety buffer or borrowing the maximum amount to get into the market.
One recent issue was cross-securitisation: that is, banks taking security across all an investor’s assets. Investors should use different lenders for different properties, to keep things as separate as possible.
2. Lack of solid research and due diligence
It is particularly important for investors to do their own due diligence, which can include looking into any future apartment developments planned in an area, as a rising supply of units can dampen price growth if the demand isn’t there.
Investors also need to use a service that provides multiple independent sources of price data and suburb information, so that investors can verify what they’ve been told.
3. Using emotions to make decisions
A common mistake,they was trying to buy a property for its lifestyle benefits rather than its fundamentals. Sticking to the budget was key, and investors have to be prepared to walk away from a property if the numbers don’t stack up.
4. Over-borrowing and safety buffers
It wasn’t uncommon for investors to get over-confident when they had acquired multiple properties. What happens is with the strong sense of certainty and superficial confidence, there’s a tendency to go out and buy all these properties. However refinancing can become impossible if an investor has borrowed to their limit, particularly considering the tightening in lending restrictions.
5. Lack of strategic planning
If someone looking for an ongoing income from an investment property in retirement would need to pay off the property in full.
That was in contrast to a first-time buyer looking to get their foot in the door and chasing capital growth, who might negatively gear an investment property, pay down their debt and then use the property later as a primary place of residence. Source: Domain Website
Using a real estate agent may give you that extra edge you need to achieve your needs and goals. If you would like advice on how to invest on property or generate positive cash flow, please speak with us.
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