Investing in property can be the pathway towards financial freedom – or financial ruin!
To give your property pursuits the best chance of success, we spoke to Damon Nagel, managing director of Ironfish, who shares the top 10 most common mistakes made by investors.
1. Putting it off
You keep thinking you have “no time” or you’re “waiting for the market to bottom out”. Life can be very busy and hectic, but isn’t taking control of your financial future a priority? “Property prices are increasing and building is not getting any cheaper,” Nagel points out. “How much is procrastination really costing you?”
2. Buying cheap!
Inexpensive properties can also bring about expensive maintenance and repair bills. “Don’t get me wrong – you don’t need to buy the most expensive properties either,” Nagel says. “You need the right investment in the right location that gives you the maximum tax benefits – thus making it cheaper and more affordable for you to own.”
3. Focusing on rent
“You need the right advice for your personal situation, and chasing income is not always the best strategy,” he says. Questions to ask yourself include: what are your future plans and goals? How long do you have to invest? Five years? 15 years? Are you looking for positively geared or negatively geared properties?
4. Taking advice from unqualified people
“You wouldn’t take medical advice from someone who watches ‘Greys Anatomy’ or ‘All Saints’ – you demand a trusted medical professional,” Nagel says. “So why would you take property advice from someone who hasn’t built a successful portfolio themselves?”
5. Only buying what you would live in yourself
Do your research and explore other locations, including interstate. You are not going to live in your investment, so don’t get emotional. Instead consider, what do tenants want? Who is your market? What property types are in demand, now and in the future?
6. Being emotional
Your investment property is not a home, it’s simply a vessel to create greater wealth for your future and provide passive income. Rental yield, capital growth, tenant quality and demand should be your main considerations, not the aspect in the kitchen and the colour of the walls.
7. Investing in houses only
“Apartments are a fast-growing asset class and have out-performed houses in many Australian metro areas,” Nagel says. “Diversification in all investments and asset classes is very important. So why invest in land only?”
8. Selling too early
Properties double on average every 7-10 years. By selling too early, you will be missing out on the next cycle and property growth period.
If you’re something of a whiz with a paintbrush then by all means, spruce up the walls of your own accord. But don’t tackle large-scale renovations yourself unless you genuinely have the skills to get the job done. “You can’t be an expert at everything you do,” Nagel says. “Stick to what you’re good at – and take advice from those in their chosen professions.”
10. Being afraid of making a mistake – and doing nothing
“Being conservative is a good attribute to possess, however if you are too conservative, then you run the risk of being one of those people who don’t do anything at all,” Nagel warns. “Even when opportunity knocks man still has to get up and answer the door.”