Help from Real Estate Investment Club's
Everybody makes mistakes, even property investors. And they can be expensive. Here we
explore five common mistakes property investors make - and more importantly how good
coaching from a real estate investment club can help you avoid them.
1. Not being objective about the investment real estate property
If you inspect a property and care what the curtains look like, whether the kitchen has stainless appliances and what the colour scheme is, you're probably making this mistake.
Many investors forget that purchasing an investment real estate property is for someone else to live in a tenant. They review the property with their own expectations in mind.
Investors would be better advised to speak to property managers about what features are desirable for tenants in a given area, rather than thinking about what's desirable for them. For example, in a family-oriented area a well-fenced backyard would be important.
2. Not seeking expert advice
Investors who sign on the dotted line without consulting their accountants, solicitors and finance brokers are risking the success of their investment.
Many people don't use these experts so as to avoid the cost. But there is a much greater cost to not using them. How many of us can be experts in tax, financial planning, finance and/or give ourselves objective advice ?
It is worth checking whether the experts invest in property themselves, to ensure that their advice is backed up by hard, practical experience. Being part of a real estate investment club gathers many points of view and voices many concerns about the investment real estate your considering.
3. Not having a "risk mitigation" strategy
Many investors fail to ask themselves some basic questions that would help them to reduce their risks.
For example what happens if :
- the property can't be tenanted for a period of time
- the property burns down or is damaged by flood or storm
- interest rates go up by another one percent or more
- circumstances change, for example, they lose their job.
The real estate investment club will show that property investors need a back-up plan for when things go wrong.
Example :
- insurance not only for building and contents, but also landlord insurance to protect against rental loss or damage. Further, perhaps income protection insurance would provide added peace of mind in case of job loss.
- the type of home loan that they use to purchase the property. Would a fixed rate be better, or perhaps a flexible line of credit.
- having access to extra funds, wither their own savings or an easily accessed loan.
4. Not doing the research
Doing thorough research prior to making the purchase will help the investor work out whether the property is a good buy or not. The selling agent, whilst useful, should not be the only source of information. After all, they are working for the seller.
Nothing beats doing your own research :
- how far away are facilities such as schools, shops, transport and medical facilities ?
- what is the history of capital growth in the area ?
- what is the demand for rental real estate properties like ?
- are there many vacant properties for lease - why ?
5. Not crunching the numbers
Most investors rely on rough estimates rather than sitting down and doing the hard numbers related to their purchases. Particularly when looking at negatively gearing a property, investors need to know how much they will need to spend each month and work out whether they can afford it.
For those investors who can't do the calculations on paper, investors should consider the
purchase of inexpensive property analysis software that helps do the sums or leave your
details to be contacted by our coaches.
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