Mistakes To Avoid In Your First Investment Property
Whilst investing in property can be lucrative, it can be easy to make mistakes if you are not careful. In this article, we look at some of the most common mistakes to avoid:
Rental Value Calculations
A lot of first-time landlords, especially those without support, may make mistakes calculating how much rent they can charged, because they are either using online calculators or just gut feelings to calculate. Whilst you can get some insight from online calculators, it is much more accurate to look at listings on property sites, such as Craigslist, Facebook and Rightmove. We have access to so much data these days that there is no excuse for estimating.
We recommend that you find some listings online in the same area as your property with a similar layout and number of bedrooms. Work out the average price within these listings and your monthly outgoings. These are uncontrollable costs. You can also work out extra costs like maintenance and eviction costs. These are controllable costs. Figure out how much profit you want to make. Add together the uncontrollable costs, controllable costs and mark-up, and you have your listing price.
Buying property is a big investment, so it is only natural to get emotional once you start viewing properties. Don’t get complacent thinking that your property is the best one in town or upset if tenants prefer other rentals. There are always other properties on the market and tenants make decisions subjectively.
Make sure that you review the competition in your marketplace and see how your property fits in. The most successful property investors put their emotions to one side and think objectively. If you don’t do this, you could find yourself too attached to the property and make rash decisions about the investment.
One tip for keeping objective is to consult with a professional who will help you to learn from their past mistakes. You should also do your research and look at getting more education in real estate.
Not Looking At Market Data
Property can be directly affected by the stock market and successful real estate investors speculate and monitor the market data. With technology available to review the latest analytics and market data, it has never been easy to do your research, and yet many investors still rely on their instinct first. Make sure that you know the facts and don’t ignore the market data.
Buying a Money Pit
Finding a property that needs a lot of work can be a double-edged sword. Sometimes there is money to be made in doing a property up, but you could find yourself drowning in bills if you are not careful. Will there be enough equity for you in the property after all the work is paid for? Do you have the right people on hand to help you do the work? Do you have enough capital to do the work? Do you have the time?
If you can’t answer yes to these questions, then you might be better buying a property that is ready to occupy and you can move your tenants straight in.
People may look to buy a first investment property in a bad area because it is cheaper. This can be a mistake. This could be difficult to rent.
Be careful on picking a high-property tax area as well. Maximising rental income and minimising expenses is important.
Doing It Alone
Investing in property is not an easy business and can have challenges, particularly if you don’t have industry experience. You may need to recruit people in your team to help you with a variety of tasks, including a good lawyer, mortgage broker, surveyor and coach/experienced property investor. This will help you to grow your property business.
You may have started investing in property with a plan about whether you intend on renting it out or redecorating and selling on. One big mistake for investment properties is to not plan for what to do if those initial ideas don’t work out. Making sure that you have an exit strategy for every property, you can minimise any potential losses.
Writing for Luckyassignments.com, Ashley Halsey is also a mother of two children and enjoys travelling, attending business courses and reading.