Common Mistakes to Avoid For First Time Property Investors
There’s a wealth of knowledge and information available when it comes to property investment. Fresh out of a property seminar, or right after reading a good real estate investment book, you might feel excited to start dabbling in property investments straight away. So you look up a potential purchase, say a melaka property, and jump in headstrong. However, while you may already know what you should to ensure success, it is equally important to know the pitfalls that you should avoid so that you don’t end up becoming a bad statistic of the property game.
1 Heart over head
Investments should always be made based on logic and analytical research. However, a lot of beginners get caught up in the emotions of purchasing a property. When you are buying a long-term home, only about 10% of your purchasing decision is based on logic, while the other 90% will be based on emotion. This is, of course, understandable because your home is your sanctuary. It is where you will be spending your future and where you will potentially raise a family.
Investing, on the other hand, is an endeavor that relies much more on pure logic. Get your heart out of the equation, as it is a common trap many beginners face that must be avoided at all costs. Allow your heart and emotions to cloud your judgement, and you might likely over-capitalize on your purchase. Rather, your buying decision should not be influenced by any emotions you may have regarding the property. Negotiate the best price and outcome for your investment goals in order to obtain the highest profit margin possible.
Instead, ask yourself a few questions. Will the property provide the gains and returns that you require and seek? Is it in a location of good growth that will attract quality tenants? Will it appeal to the market and sustain its property price in the long term? Answering these questions will be a start that can guide you towards a sound and logical purchase. Rather than buying a house because it had the beautiful ceilings, or gorgeous flooring, think about the purchase based on financial gain instead of your own personal feelings. It has been said often, that investing is all about the economics, and not the emotions. So, keep it that way.
2 Fail to plan and you plan to fail
It is an age-old adage, but that does not make it any less true. Before you jump in and attempt to build a lucrative property portfolio, take some time to come up with a financial plan of attach. Jumping in without a plan is like setting out on a road trip without a map. One inevitable wrong turn and you may just end up lost and in over your head.
Instead, plan where you want to end up. Only then can you devise and determine the best plan to get there. Any attempt at successful wealth creation requires set goals and sound planning. Focus on both short-term and long-term goals while ensuring that your investment decisions are cohesive with your overall investment strategy.
Ask yourself these questions. What do you want to achieve with regards to income? Are you chasing short term yields? Or do you envision long term capital growth? What type of property best suits your investment endeavor? What can you do to meet your income goals? The answers to these questions play part and parcel in guiding you towards a carefully thought through outline of your investment plans. Plan your action, and then action your plan, and you will be exactly where you want to be on your investment journey.
3 Diving in or dithering
You’ve heard of the plethora of real estate investors that never make it beyond their first property, or sometimes never even make it to their first. The two key traits in these failures is that they are either acting too impulsively and jumping in over their heads or being overly cautious and never acting at all.
The first type wants it all in a hurry. They think they should have already had it all yesterday. Just after attending one seminar or reading the first book they get their hands on, they overeagerly rush in without thinking it through. And when these endeavors fail, they lose heart and throw in the towel.
The second type wants it all but is afraid to take the plunge. They attend every seminar they hear of, read all the books and do all the research, and end up going through paralysis by analysis. Their procrastination is their own worst enemy. In fact, all the dilly-dallying only helps get them overloaded with information and unable to act.
The best route is of course through finding a happy medium. Of course, you should learn as much as possible in order for you to be able to make sound investment decisions. However, don’t think that you can ever know it all before you begin your journey. Sometimes, it is the mistakes along the way that teaches us what we really need to know. The key is to learn from mistakes to make a success of your investment endeavors.
4 Being less than thorough
When you’ve found the perfect property and you are ready to make your move, make sure you have done all your research into the investment. For example, if a potential property comes on the market, try digging a bit into why it is being sold in the first place. Knowing the seller’s motivation can make or break your chance at negotiating a good purchase price. When you first visit the property, look for clues as to the seller’s personal situation. While it might sound callous at first, this gives you the opportunity to make the perfect price offer, which may come at a bargain. This also helps the seller move on with their lives.
Be thorough with the property’s properties. For example, always make second or third visit at different times of the day to see if the environment changes. This helps you make doubly sure that your potential purchase has a high potential of being rented out easily. Also, do not forget to have the relevant inspections done to uncover any potential issues. It is, of course, better to nip any issues in the bud to give yourself some peace of mind.
5 Not doing your homework
Understanding real estate and property markets takes time. The cyclical nature of commercial real estate (i.e. recovery, expansion, hyper supply and recession) is something that both new investors and experts struggle to get to grips with. Don’t think that just by attending a seminar or two, or by reading a couple of good investment books, can you develop the knowledge and handle on what type of real estate investments you should make.
It’s much, much more than that. You can never know too much about your investment. Rather, your success will depend greatly on how much you know. So, take the initiative to learn about the neighborhood you intent to invest in. Once you know it like the back of your hand, and know all about the amenities, vacancy rates as well as historical real estate values in the area, you are halfway there!
Here’s a good tip. You can make yourself familiar with any given area just by pounding the pavement and making a visit in person. Talk to locals, real estate agents and even property managers to get a good grip on areas that are worth investing in.
This article is written in collaboration with PropertyGuru
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I am a mother to two boys; Ethan and Ayden and a wife to Darling William. I'm a stay at home mum who blogs to break the monotony of life and to avoid feeling jaded. Would love to get to know all the Super Mommies and Daddies and Babies or Singles out there with the hope that we can learn more from each other. Most of all, I am a happy person, and I hope YOU are too.
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