You can get incredibly wealthy by investing in property. By being shrewd, patient, and doing your research well, you can create a profitable real estate portfolio with the right picks. However, due to a covalence of avoidable mistakes and a blatant disregard for common law, you can miss this elusive possibility, as so many people do.
Property investment is not a walk in the park. The entire experience can be overwhelming. There are things that can seem to conspire against you; things such as changes in interest rates, area council decisions, supply and demand, and finances can create problems for you; should you not pay close attention to them. This is why some investors commit mistakes that end up costing them in terms of time and money.
New investors are more prone to falling into these mistakes. It’s prudent that they are made aware so as to avoid them and to build a successful portfolio. For that, here are 5 of the commonest mistakes new property investors commit regularly.
Not Having a Documented Plan
As the adage goes, failing to plan is planning to fail. Much like building a house, establishing a lucrative property portfolio also requires a plan, something that most new investors are not interested in doing.
Plenty of things have to be put in perspective before you can start investing. Your goals; where you want to end up, how you want to get there, and why. A cohesive plan is supposed to guide you to your goals. It should include income projections, cash flow management plan, lifestyle adjustments and the timeframe to achieve all of it plus other things. It should consider both your short and long term strategies—what you want to accomplish with regard to income. Is it short term yields or long term capital growth?
A documented plan not only serves as a guide throughout your investment journey, but also as a yardstick on which to measure results. If carefully thought out, you can end up exactly where you want to go.
Too much Speculation
The majority of first-timers are looking for a way to get rich quick. They hear it from ‘’successful’’ property evangelists who just want to sell their latest scheme, or read it in the papers, and suddenly, they start to think that they can also do it.
If you’re investing in property for the short term gains, you’re speculating and not strategically investing. Real estate is one asset class that’s more of a long term prospect. It lacks the liquidity and the volatility that other assets classes have. This makes it hard to profit consistently from flipping houses. But if you invest approach property investing with guile and patience, you increase your chances of success. Searching for and buying intrinsically-worthy properties that will grow over a significant period is the best way to make it to the top rung.
A documented plan not only serves as a guide throughout your investment journey, but also as a yardstick on which to measure results.
Inadequate Research
By reading a few blogs and attending a few seminars while convulsing in some magazines, some new investors start to think that they have a clear representation of the market, which is wrong.
If I have one piece of property investment advice, it is that you should always do your research adequately before determining what to buy and where to buy it. Make yourself completely familiar with every investment opportunity. Talk to the locals and real estate agents if you have to and find out all about the economic drivers and property attributes that could influence your returns. Assess and understand the upside and downside of each option so as to come up with a sound decision. You can never know enough your investment area.
Doing it all by yourself
It’s easy to assume that you can do it all when you’re a new investor. But the sad truth is you can’t. You need help from qualified and licensed professionals such as accountants, real estate brokers, and mortgage brokers.
Each one these players is important to your success in this field. Their advice in areas such as cash flow management, taxes, risk assessment, and investment advisory services is invaluable in most situations, and going on without them can cost you in the long run.
There are numerous considerations to make in property investing. If you can leave some of them to the experts, you’ll have more time for those that require more of your attention.
Poor Assessment of Risk
The most common trait of new property investors who never make it beyond their first property is poor assessment of risk. They buy the first property on offer without batting an eye and when it blows up in their faces—as it usually does—, they give up.
Before buying a property, it’s important that you understand the amount of risk that you can take on to avoid over exposure. If you inadvertently take on too much, it could drive you to bankruptcy. Take on too low and your returns are lowered.
You can manage risk by doing adequate research and analysis, and by finding concrete evidence to align with your investment decisions.
