These are exciting times to invest in Australia. Housing prices have been increasingly steadily in 2014 across Australia, albeit at varying rates.
Here’s the hike in annual percentage between 2013 and mid-2014
- Sydney: 15.6%
- Melbourne: 11.6%
- Brisbane: 4.8%
- Adelaide: 4.6%
- Perth: 4.7%
- Hobart: 0.9%
- Canberra: 1.7%
Are you readying to buy your first property in Australia? If your aim is to build a solid property investment portfolio, you are setting out on an exciting yet sometimes tiring journey.
Many first-timers real estate investors make mistakes that can cost them dearly in the long term. It is important to learn from the mistakes made by others in the past and avoid these common pitfalls.
Are you sure you can afford this property?
What you think you can afford and what you can TRULY afford (comfortably) could be very different. Many first-time investors only look at the property purchase price and not the recurring costs.
Before you think of buying a property, please note down all your monthly expenses such as:
- Car Mortgage
- Education fees
- Groceries
- Credit card payments
- Insurance
- Savings
Also, consider major yearly expenses such as festivals, holidays, etc.
Once you add up these expenses, subtract them from your combined annual income. You will now know REALISTICALLY as to what you can have the funds for. If you are drooling at the sight of that lucrative deal which is outside your budget hold on! You may sign up for something that can quickly turn messy.
Have you considered additional expenses?
Properties invariably come up with extra expenses that first-time investors usually ignore. Here’s a list of a few common ones you must consider.
- Council
- Strata
- Water
- Mortgage
Once you buy a property, you will have to provide for these expenses on top of your monthly expenses. Take a good look at them before you take a decision.
You may also want to consider ‘vacancy costs’ which is a loss of income if the property is not occupied for quite a long time. If you select right properties judiciously, that is, properties where vacancy rates are less than 3% (which is only 1.5 weeks in a year), you need not worry about this. However, it is important to be aware of this major factor.
Are you getting Swept Away?
First-time homebuyers wanting to enjoy a big upside on the value of your property must ask these million dollar questions:
- Am I clear about my goals per property investment
- Do I review them every now and then?
Consistent Value addition to your property portfolio is the primary goal of most smart investors. The best way you can add value to a property (House or Apartment) is buying at the right time and waiting and NOT selling at any cost before you see the boom.
It is always advisable to hunt for a property that has not yet realized its full potential.
The biggest pitfall for first-time investors is to go for only the ‘high yield’ property which may not show strong appreciation in the long term
Buying and selling too quickly is another big mistake made by inexperienced investors.
Some the reasons why they may be doing it, are as follows:
- listening to unprofessional investors such as friends and family
- paying too much attention to the media negativity
Are you thinking of NOT hiring a property manager?
Not just the first-time investors but also some experienced investors may want to take the DIY (Do It Yourself) route!
Most people feel daunted by the real estate agent/manager fees. It is advisable to use a property manager to manage your asset irrespective of its price. Essentially, a professional estate manager gives you that most expensive luxury – peace of mind.
After all, at the end of the day, we are all busy with our life and its challenges. It won’t be such a smart idea to invest our preciously limited time with the property management issues. It is seen that smart investors only care about two things – their time and how the property will make money.
If you look at the average fee charged by real estate/Manager it is very reasonable – only about 5-8% every month from the rent. It is indeed not a big deal. However, inexperienced investors would attract a lot of headaches for wanting to save this small amount.
Having a reputable licensed agent to work for you is always profitable in the long run. They will protect your interest at all times.
Another common mistake made by first-time buyers is buying an old property without doing due diligence such as checking the sinking fund capacity of the apartments building.
Also, inexperienced investors usually buy properties in their suburb or the suburbs they are familiar with. This may not always be the smartest of property decisions you have taken.
Have you thought about Future scenarios?
Make sure you consider some of these questions about property you are planning to buy:
- Are there any future development plans being worked for your neighborhood?
- Will your street be converted into a major traffic artery?
- Are any highways coming up near your property?
- Are there any likely changes in the zoning around your area?
- Is there a vast undeveloped area around your property? What kind of development could come up there?
- What is the trend in the home values in your neighborhood- rising or dropping?
If you get encouraging answers to these questions, by all means go ahead.
Investing in a property is, perhaps, the biggest investment decision you have ever taken. Be ready for an exciting journey ahead! It is challenging. Speaking with someone who has already passed this test will make this path smoother.
Now that you know about 5 common pitfalls mentioned above, you are better prepared for some of the decisions. You can now shield yourself from making some really silly mistakes and repenting in the future. Investing in properties in Australia can be fun and highly rewarding if you learn the ropes well. It is important to keep learning and using use your common sense.
Investing in Properties in Australia requires wise investment strategies. At www.investinproperties.com.au we help you build wealth through property investment with little contribution.
Our team members are active investors and owners of several properties across Australian capital cities. Let us offer free property investment advice.
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