Regardless of age, all first-time investors are prone to making the same mistakes. Here are some dos and don’ts:
1. Don’t think you can renovate yourself if you don’t have the skills.
Investors often look for cheap properties they can fix up, but don’t count on major renovations being done cheaply if you don’t have the know-how or experience.
2. Do your research.
“There’s a whole raft of things you should be looking at but very few investors undertake the actual due diligence on what it’s going to cost you to hold a property,” says Herbert.
3. Don’t believe interest rates will stay low forever.
The past six months have proven that interest rates will only shift upwards from their current lows. Don’t get complacent – knuckle down and secure what you have as quickly as possible.
4. Ask the important questions.
“This is not gambling money away; it’s a significant business decision. So make sure you ask yourself: how much money do I need? What’s the return going to be? Is this the best place for my money?” says Herbert.
5. Don’t let emotions cloud judgment.
“The whole lead-up process to choosing that first property can be emotional, but you must take the emotion out of it,” says Herbert. “So many people buy a property because their friend told them about it, because they liked the marketing, or it’s in the next suburb and they drive past it every day. There’s an element of laziness too. Go out and do some hard yards – again, more research.”
6. Pay credit cards on time and avoid overdrawing savings accounts – all of which incur fees.
“It does not demonstrate a responsible attitude to finance and lenders are less likely to loan money to someone whose accounts are ‘irregular’,” says Herbert. “I recommend people ensure their account conduct is ‘clean’ for at least three months prior to lending, and preferably six months, as lenders can and do ask for savings statements for this period for first-time buyers.”
7. Don’t be stingy.
Maintain your property well to attract and maintain good tenants. To make a bigger profit you must be willing to spend some money whenever you can.