Choosing to invest in property tends to be a wise decision. Property is one of the old favorites for investment, purely because it is so very tangible. Unlike numbers on a screen or stock portfolios that you can’t see, a property is something that you can touch, feel, and use to reassure yourself that your financial future is in good hands.
Making the decision to invest in property rather than stocks and shares, or other investment options, is just the beginning. With that decision behind you, you’re going to be faced with a whole litany of different problems. Buying an investment property might seem like a safe bet as it’s a process you’re somewhat familiar with; after all, you bought your home, so how different can this be?
The truth is that it’s very, very different – and in fact, failing to acknowledge this difference is one of the most dangerous things you can do when you begin to dabble with the property market. For new property investors, there are a few crucial mistakes that seem to tempt their naivety. If you want to skip past the learning curve and jump right to making a profit, then you’d be wise to avoid these three beginner’s mistakes.
1) Thinking About What You Would Like In The Property
Property investment means that you’re buying a house for other people to live in – but you’d be surprised by how many first-time investors seem to forget that fact. New investors find themselves looking at each property, wondering what it would be like to live there, and making judgements based on their own personal circumstances. This can be incredibly problematic when trying to find an investment property. You have to try and remember that your personal circumstances just don’t apply.
You might be a busy Mom, have a full-time job, and always have to be running around after your kids. That reality can mean that you look for homes that are large, spacious, and are going to provide plenty of separation between the adult and children’s use areas. However, if you’re going to be marketing your building to young professionals, then your priorities as a busy working mom are – to be frank – not really relevant.
You have to forget the kind of house that you would choose, because you’re not choosing for yourself. Instead, try and evaluate based on the target market and demographic that you hope to either sell or rent to. Put yourself in their shoes; even Google to see the kind of homes that they prefer; and you will be far better placed to make a decision for the kind of property that they truly want… rather than what you think they want.
2) Overextending The Budget
Realtors have an unpleasant trick. When you give them the budget for the amount you would like to spend on a property, they will instead see this as a jumping off point. Rather than showing you homes that are within your budget, they will show you homes that are more expensive – but close enough to your initial budget that you might be tempted just to stretch that little bit further and buy the better property.
It’s imperative that you don’t fall for this trick. Yes, if you do extend your budget you will be able to buy a better property; one that needs less work, or one that is closer to better transport links. However, your budget is defined as it is because that’s what you can genuinely afford. If you start extending too far beyond that initial budget, then you’re just setting yourself up for severe financial risk rather than investing in your future financial health.
If you find yourself stuck with a realtor who is only willing to show you more expensive properties, then it genuinely might be best for your future if you choose to go it alone. It’s easier than it’s ever been to look for affordable properties to buy, thanks to the internet and various listing sites that can help connect sellers with buyers. You don’t need to go through a realtor, especially if you think doing so might mean that you fall victim to tricks that make you spend more than it’s advisable for you to do so.
3) Buying When The Market Is High
It is possible to choose a bad time to make a property investment. Just because it’s the right time in your life to be making such an investment, that does not mean that the market is necessarily going to play ball. You might find yourself trying to buy in the midst of a market surge, which means any property that you do buy is going to be more expensive. Given that this is an investment property – so you don’t just need to buy a house as soon as possible so that you’ve got somewhere to live – you’ve got time to wait it out, be more selective, and allow the market to catch up to your budget.
Buying for any other reason than you found a place that’s a good deal that provides good support for the personal finances of your future, is a bad reason to buy. Don’t get swept up in a housing bubble; always look for viable opportunities that offer a good return on your investment and will be beneficial for years to come, whether the market is surging or crashing. Always try and ensure that a decision you make right now is still going to be a good decision in ten years time; which is easier said than done.
There’s no doubt that real estate investment has its potential problems and pitfalls, just waiting to eat up any newbie investor who doesn’t know to avoid them. Hopefully, though, you now at least have an idea of what you should be steering clear of to guarantee a property investment that’s actually going to be worth it. This is a big decision, so take your time, keep the above facts in mind, and you won’t go far wrong.