5 Common Mistakes in Property Investment

Friday, March, 2019

When it comes to property investment, instead of trying to find the best way to make a successful investment, it might be more important to avoid some mistakes that people commonly do. 

We will take our cue from Michael Yardney from Property Update who will share some of his thoughts about these common mistakes and some useful tips to overcome them.

1. Heart Over Head
When buying a home, about 90% of your purchasing decision will be based on emotion and only 10% on logic. This is understandable, as your home is where you’ll raise a family. The safest place on earth. Your sanctuary.

When it comes to investing, however, letting your heart rule your buying decision is a common trap to be avoided at all costs. Allowing your emotions to cloud your judgment means you are more likely to over-capitalize on your purchase. Beginning property investors should always buy the property based on analytical research.

Ask these questions to yourself, whenever you are buying a property:
Will it provide the gains and returns you require? It is in the best location to attract quality tenants? Will it appeal to the owner-occupier market that sustains property prices in the long term? By answering these questions, you will be buying a property based on financial gain rather than personal feelings. And at the end of the day, investing is all about economics, not the emotions.

2. If You Fail To Plan, You Plan To Fail
It is an old saying, but very true. The key aim of property investors is to build a lucrative property portfolio. One that will one day give them financial freedom.

However, doing so without a plan of attack is like setting out on a road trip without a map…you’ll inevitably take a wrong turn and end up lost! In reality, planning is bringing the future into the present so you can do something about it now!

Successful wealth creation through real estate requires you to set goals, determining where you want to end up, and then devising a cohesive plan to get there. You need to focus on both the short and long term and ensure your investment decisions gel with your overall strategy.

Work out what you want to achieve with regard to income – are you chasing short-term yields or long-term capital growth – and how you can best manage your cash flow as a smart investor.

What type of property do you need to buy in order to meet your income goals? With a carefully thought through outline of your investment journey, you will end up exactly where you want to be.

So plan your action and then action your plan.

3. Taking Too Much Risk or Not Taking Risk at All
Two of the most common traits of real estate investors who never make it beyond their first property, are either acting too impulsively or being overly cautious and never acting at all.

The first is being in too much of a hurry. They attend one seminar and buy into the first crazy scheme they’re sold without thinking it through and when it doesn’t make them rich overnight, they lose heart and throw in the towel, saying property just isn’t for them.

The second are procrastinators and their own worst enemy. They attend every seminar, read all the books, listen to all the property podcasts and watch all the videos, only to end up overloaded with information and unable to act. We call this paralysis by analysis.

One thing to remember, when you are taking risks, there is always a room for mistakes. You need to accept that possibility and gather enough courage to try. Then learn to make a calculated decision based on a thorough investigation of the property that you are looking to invest in. Even if you took the wrong property investment, usually a comprehensive analysis and research that you did before would still save you from losing too much. So count the risk, gather your confidence, and start investing!

4. Speculation Over Patience
Many first-timer property investors are hoping to become millionaires overnight. They think the property will be a quick fix to their financial problems, but the truth is seeking short term gains in real estate is more about speculation than strategic investing. 

In Australia, property prices double every 7-10 years, so to expect a massive increase of your property value in a short time is a little bit unreasonable and it does not match the facts.

Securing proven, high performing property that grows consistently over the long term is the only way to ensure you make it to the top of the property ladder.

5. Poor Cashflow Management
We have seen some of our clients didn’t manage to settle their property. The case is mainly about their cashflow. It’s quite easy to fall into the trap of poor cash flow management as a beginning property investor.

Understanding all of the costs involved in acquiring and holding property can be difficult and you should always seek the advice of professionals who know about real estate investment to ensure you know exactly what you’re getting into financially. This is where Centurion International Holdings comes in. If you are looking to invest in Australian properties, we can assist you right from the beginning until the end. We can help you calculate how much amount you have to pay for a property investment, which includes the deposit money, installment, taxes and stamp duty. We will also inform you of the current rental fee for your property area, so you will know how much money you will make from rental that can support your installment. Basically, we have an entire team of professionals that are dedicated to assist our clients through all phases and process of purchasing a property in Australia. 

Moreover, in planning for your property investment, don’t forget to account for any contingencies, such as extended vacancy periods or unexpected maintenance costs. A good rule of thumb is to allow about 10% of the property’s value for costs such as rates, land taxes, insurance, maintenance, and management fees.

It’s great to dream about the riches you can make from real estate, but it’s critical to enter into property investment with your eyes wide open when it comes to all the out of pocket expenses you’ll incur along the way. Examine each potential investment analytically and ensure you make adequate allowances. By underestimating your income and overestimating your expenses you’re more likely to avoid any nasty surprises.
Good luck with your investment!