What Mistakes To Avoid When Buying An Investment Property
Investing in property might seem like a surefire path to financial success, but it’s not as simple as handing over the deposit and sitting back to watch the money roll in - if only that were the case, perhaps we’d all be property investors! The fact is that the property market is a tricky thing to get to grips with, and even those with plenty of experience can have problems, so how can a beginner make the most of it and the opportunities they’ve got if they want to invest? If you want to know at least some answers to that question, keep reading to find out more so you can make good investments and reap the potential rewards that being an investment property owner can bring.
Don’t Chase Trends
No matter what it is you want to invest in, there are sure to be trends linked to it because everything has a cycle - right now it might be that everyone is investing in property in a certain area, for example, or perhaps it’s all about flipping properties rather than holding onto them for a long time and becoming a landlord.
It’s always going to be tempting to follow what everyone else is doing, especially if it looks as though whatever the trend happens to be is actually working and making people successful. However, there are problems with this idea, and it might actually be that because you’re buying a property in an area that people think is ‘hot’ right now, you’re going to pay too much because the prices will rise quickly. And then what happens if that area doesn’t get any more interest? The answer is that you’ll probably lose a lot of money and be stuck with a property you don’t want.
That’s why it’s far better to research everything before you buy anything, and only invest money in property that, as far as you can tell, at least, is going to be a good long term investment. Trends just don’t last long enough to make a positive difference.
Always Check The Figures
When you’re buying your dream home and you’re the one who’s going to live in a place, getting a gut feeling as you walk through the door and knowing you’ll be happy and comfortable in a place is fine - it’s great, in fact, as it can really help you make a good choice (although your budget always needs to come into play as well, of course!). However, going down that route when it comes to making a decision just isn’t going to work as well if you want to buy an investment property - there’s no place for emotion in that situation, and instead it has to be about the numbers because that’s why you're buying the property in the first place.
When you’re buying an investment property, you’ll need to calculate everything: mortgage repayments, property taxes, maintenance costs, and potential rental income. Don’t forget to factor in empty periods and unexpected repairs as well because they can and will come up, and since many investors fall into the trap of underestimating expenses, the last thing you want is to be one of them - the outcome is generally debt and regret. In other words, you’ve got to think of buying an investment property as a business decision because that’s exactly what it is.
Not Doing Due Diligence
So you’ve found what you think is the ideal property and it looks as though - because you’ve done the calculations - that not only can you afford the place, but you can make a profit as well. That’s perfect, isn’t it? Well, that’s how it might sound, but the truth is you won’t know for sure if you don’t do what’s called ‘due diligence’, which means digging much deeper to make sure you know all the ins and outs of the property and what might become a problem further down the line - that could be disputes, tax issues, planning problems, or anything else. The last thing you want is for any of this to rear its ugly head at any point in the future, causing you stress and financial problems when you thought you’d made a great choice.
The fact is that skipping due diligence is one of the costliest mistakes investors make, and yet so many people do it because they’re excited to move forward with their ideas and they don’t want to miss out on what looks like a fantastic property. What you actually have to do is investigate the property thoroughly, including its structural integrity, legal boundaries, environmental risks, and more. This is where a real estate lawyer can be really useful - they’ll be able to find and let you know about any legal issues before they turn into real nightmares, and you’re really running a big risk without having a lawyer like this on your team.
Not Thinking About Location
Location, location, location… you’ve heard it before, and you’ll hear it many more times if you’re doing anything to do with buying property and do you know why you’ll keep hearing it? It’s because it’s true - the location of the property you’re buying is crucial, and could be (apart from the cost) the most important thing you’ll need to think of. However, many people think about the actual property before they think about the location, and that’s the wrong way round because you can improve the property, but there’s nothing you can do to change the location once you’ve bought a property there. That can be a great thing if you pick wisely, but it can be a costly mistake if you get it wrong.
Before you buy anything, make sure you really study the area it’s in and work out whether it’s a good choice. Some of the things to think about include the transport links (roads and public transport), shops, schools, crime rates, and any other amenities in the area. Even if you’re not going to live there yourself, these things are still important because your tenants will want a safe area with everything they need, and if you pick well, you’ll rent the property for more money and in less time, which is definitely what you’ll want.
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