Investing your savings is important if you want to secure your financial future, and property investments are one of the most popular options right now. House prices are on the rise, which means that your investment is very likely to increase in value over time.
It also means that more people than ever are renting, so it’s easy to find tenants for a residential property. However, a lot of first time investors make the mistake of thinking that buying a property is easy money and as long as they have the cash for a down payment, they are guaranteed a successful investment.
The truth is, it doesn’t work that way. Even though property is a great investment, you still have to know what you’re doing and make sensible decisions if you want to make money, and losing money is still a possibility.
Complacency often causes new investors to make rushed decisions and they make a lot of simple mistakes that could easily have been avoided. If you are a first-time property investor, these are the mistakes you need to watch out for.
Not Knowing Why You Are Investing
Before you make any investment, you need to have a clear strategy and understand what your goals are. Securing your financial future is too vague, you need to decide how long you want to hold the investment for and when you expect to see returns.
Are you planning to sell the property in a few years? Are you going to buy a single property or is this the beginning of a real estate portfolio? Will you eventually live in the property when you retire?
These are all important questions to answer because they will impact your decision about which property to invest in. For example, if you want to live in the property after you retire, you may want to consider a nice vacation property somewhere. If you want to see short term returns on your investment, don’t buy a property that needs a lot of work.
Buying A Fixer-Upper
You can increase your profits if you buy a property that needs a lot of work and fix it up. However, you will only save money if you plan well and find ways to save on the renovations. Fixing up a house is a huge amount of work, and it’s a big task to take on.
If this is your first property investment, buying a fixer-upper isn’t a great idea because you are likely to go way over budget. This will eat into your profits, so you won’t see a good return for a long time.
It’s much better to buy a brand new house to begin with, and then if you want to invest in more properties in the future, the revenue from your first property can help to pay for renovations on the new one.
Not Doing Your Due Diligence
Research is the key to successful property investments, which is why it’s so important that you do your due diligence. You’re not just looking for a great house, you’re looking for a great house in a desirable area for the right price.
It’s also important to consider the demographic in the area because this will affect your ability to find tenants. For example, if you buy a single bed flat in an area that is mainly populated by families, you’ll struggle to let it. Carrying out inspections on the property to ensure that there are no issues that are expensive to fix is important as well.
Many new investors fail to do enough research and they end up making bad investment decisions. If this is your first time, it’s a good idea to work with a company like Prosper Group Agents who can support you at every step. They will help you to source the right property and even find listings that are not on the market yet.
Once you have a shortlist, they will help you to do your due diligence to make sure that you’re making the right decision. They can also help to negotiate the price and manage all of the paperwork, so you get the best possible deal.
Letting Your Emotions Cloud Your Judgment
When you are buying an investment property, it’s important to remember that you’re not buying a home for yourself. So many people pass up on a property because they don’t personally like it, but that’s not what matters.
You need a property that potential tenants will want to live in, regardless of whether you like it or not. Consider the features that tenants value, like location, school districts, and security, not the features that you personally look for in a home.
If you can avoid these common mistakes when buying your first investment property, you stand a much better chance of success.