Ten mistakes to steer clear of when buying
Buying the right investnment property can be daunting. When selecting the correct property, there are obstacles along the way you need to be conscious of in order do it successfully. Here is my list of the top ten mistakes made by first time property investors.
1. Not setting clear investment objectives
You must be confident residential property will deliver your financial and personal investment objectives. You are investing for a reason so these objectives must be clear from the beginning.
2. Thinking you can make money quickly
Money is very rarely made over night. Property is a medium to long term investment – you will normally get the greatest returns after around 5 to 7 years. An astute investor should be aware of this time period and be patient.
3. Not weighing up the risks and rewards
There are many risks one should consider when investing in property. While there are a number of benefits as well, it is very important to weigh us both sides.
4. Going solo
Your going to need help finding, financing, managing and structuring your investment. If you don’t seek the advice of experts you may find yourself considerably worse off in the long run
5. Believing negative gearing makes money
Negative gearing enables you to reduce your tax bill but remember you don’t actually make money paying less tax, you simply lose less
6. Poor cash management
You must prepare a cash budget so you understand when and how much of your own money you will need to commit
7. Risky investment structure
The wrong type of invetsment loan and the wrong ownership structure can adversely affect your overall after tax returns. Expert advice is a must
8. Paying too much
If you pay more than a property is worth you may not get the growth or capital return you expect. It is therefore very important to do your due diligence to determine a fair and reasonable price before you buy
9. Inadequate research
Without proper research you may buy the wrong property in the wrong location and attract the wrong tenant – this could be a recipe for disaster
10. Poor insurance
To help mitigate the risk of loss or damage to your property, you must take out adequate landlord buildings and contents insurance. You should also consider life insurance which protects your family.