Property Investment for Beginners – 10 Common Mistakes

For beginners, purchasing an investment-grade property is an exciting adventure. However, a lot of things go into the entire process. Since it is a huge investment, you must take time to make sure the property you want to buy is among the best of the best.

The process of selecting an investment property is beyond choosing a beautiful house within an area. There is more! That’s why the most successful investors take time to select as well as review properties. Because you are just starting, no one expects you to become a real estate expert overnight.

It takes skill, knowledge, and determination to make money from purchasing and reselling properties. You also need to know the mistakes other beginners make, so you can avoid them. In this post, I’ll share 10 common mistakes as well as tips to help you win big in the industry.

Overlooking Real Estate Training

As a beginner, learning the ropes of the industry will help you to avoid committing a faux pas. Appropriate training can get you prepared for property investment. It could come in form of seminars, books, or coaching sessions. Remember that overlooking training makes you prone to errors that could have been avoided.

If You Fail to Plan, You Plan to Fail

When the market is hot, it may be difficult to resist the urge to make purchases. But you can’t just purchase a house only for you to start thinking about how to resell it. Therefore, you must have a solid investment strategy before investing your savings or seeking a mortgage. 

You should know the type of property you want, whether it’s a single-family unit or a multi-family unit. After that, come up with a purchase plan for the property, then scout for houses that fit into your plan.

Skipping Research

When people want to purchase appliances or devices, they do a lot of research. They check out different models and read reviews to find out whether the item is worth their money. When it comes to purchasing a property, the research should be more thorough.

Whether you are a flipper, land developer, future landlord, or personal homeowner, being inquisitive is a plus in real estate. You should be able to ask questions, not just about the house but also the neighborhood where it’s located. 

A house may look good but your neighbors might be young people who love to party all-night, which means you’d have to contend with noise at night. Also, except your target is student renters, you shouldn’t be looking for a property around a college.

Here are some questions you should ask concerning the property you want to purchase:

• Why is the house up for sale?
• Is it close to a commercial area or a construction site?
• Is the area prone to flood or termite attack?
• Are there permit issues or problems with the foundation that should be addressed?

Forgetting That Real Estate Is About the Locality

Real estate is about the community where the property is situated. Hence, there is a great need to know what works in the local market. This will help you make buying decisions that are more likely to rake in profits.

You can order a free property report on our website and get better understanding of most recent sales in that area.

You also need to learn about land values, demand and supply, inventory, and so on. In-depth knowledge of these terminologies will help you to decide whether to purchase a house that’s on the property listing or not. 

Going Solo 

Many investors think they are knowledgeable enough to close real estate deals without assistance. While things may work out well in the beginning, you may not know how to resolve an unfavorable deal. Worse still, you do not have anyone to turn to.

It is important to work with a network of experts to succeed in the industry. Your network should include a town planner, real estate agents, an insurance rep, an attorney, and a home inspector. Such experts can help you discover faults in the property or the neighborhood. An attorney can also warn you about any easements that may haunt you after closing the deal.

Overlooking the Needs of Tenants

If you want to purchase a rental house, you must consider your potential tenants. Do you want college students, singles, or young families? Families will prefer areas with a low crime rate and good colleges. Singles may want an area with access to mass transit for commuting to various cities, including a nearby nightlife. Ensure you match the investment with the type of tenants that will likely rent within that vicinity.

Poor Financing

Some people make the mistake of searching for properties before understanding their borrowing capacity. It is especially bad and riskier when they participate in auctions that do not give them ample time to evaluate their current financial situation and life afterwards. As a result, they acquire more debt than expected and sometimes fail to meet condition to finance as it might take too long to obtain unconditional approval from lender.

Today, various mortgage options are available for individuals to buy an investment property in Australia. You can book a free consultation to get a pre-approval done in advance or check your future monthly repayments using our online repayment calculator placed on NG Loans website or 

Overbidding

Searching for an investment property is time-consuming. When you finally find a property that matches your desires, it is natural to become anxious about whether the seller will accept your bid or not. However, the challenge with anxiety is that you may overbid on the property, and this could cause problems for you.

You may overstretch yourself to accumulate more debt that may take you years to regain financial balance. To know whether you are overbidding, ask a real estate agent to go through the house listings to search for the price tag on similar homes around that area. Logically, if the house has unique features that may appreciate over time, your bids should correspond with other homes on sale in the area.

Underestimating Expenses

Apart from making your mortgage payment, there are other costs related to owning a home. These costs include remodeling the kitchen or bathroom, installing a modern roof or energy-saving window, and yard upkeep. You also need to check whether the appliances are functioning.

To avoid underestimating property-related expenses before making a bid, ensure you write down the costs of maintaining and running a house per month. If you want to become a landlord, including this cost in the rent can help you calculate your ROI. That way, you will know whether your income can cover the maintenance costs and mortgage. You will also find out whether the property is actually affordable.

Developing Cold Feet

If you are experiencing cold feet, it’s absolutely normal because real estate still seems like uncharted waters. However, being indecisive for too long may make you miss the juicy deals in the market. Although it is necessary to be cautious, being extremely timid will deprive you of opportunities in real estate. Use the knowledge gained from training and research to make the right choice.

The Bottom Line

In actual fact, if real estate investment were easy, everyone would be jumping into it. Thankfully, investors can avoid most of the things they struggle with as beginners. Just ensure you surround yourself with the right set of professionals, plan properly, and do your due diligence before signing any contract.

Book a free consultation today and our mortgage brokers will be happy to navigate you to the right direction.