Avoid the confusion and costly mistakes 95% of solo investors make.
It’s not because property investing is complex by any means, but there is a science to picking a winning property. Qualifying your choice of investment property can literally mean the difference between a portfolio of two properties and a portfolio of 20 properties – just ask my co-Founder Lianna Pan who owns nearly 30 investment properties…
Here are seven mistakes that you’d do well to avoid when investing in property:
1. Not doing enough research
There is a saying that ‘knowledge is power’ and it always reigns true. The more research you conduct, the better decisions you will make. Unfortunately, a lot of investors will go on ‘gut feel’, without any real reason to invest where they do. A haphazard approach such as this will sadly lead many investors to fail, and I will demonstrate time and again that arming yourself with the right research and data will have you making better decisions.
2. Short term and not long term planning
Smart investors plan out their strategy years in advance. Sadly, many investors simply buy an investment property because it seemed like a good idea at the time, or because maybe their accountant suggested it. When you plan your strategy in advance, you know what types of properties to purchase and in what order depending on your financial situation.
3. Looking only at demand, and not supply
The problem is this – you might find a ‘hot suburb’ only for developers later to rush in and flood it with high rise apartments, leaving your investment one of dozens of empty properties looking for a tenant. Of course, demand is relatively easy to look for. Supply however is almost impossible for the average investor to figure out. We spend thousands of dollars each year on data to understand the available supply in suburbs across the country. We share these findings with our members so they don’t have to spend hours, days and weeks trawling through local council planning reports to figure out what developments are being proposed and where.
4. Negative cashflow (not to be confused with negative gearing)
With interest rates so low, most properties are at least cashflow neutral. This is where your income from rents and tax benefits is the same as your expenses such as interest repayments, insurance, maintenance and so on. For our members our target is $10,000 cashflow positive or more. There are multiple reasons for this, the first is that interest rates will eventually start increasing and when this happens you’ll potentially lose income unless you have a similar increase in rents. So being cashflow positive is a buffer against this happening.
5. Investing in an older property
I’m sure you can understand just how many things can go wrong with an older property. Termites, poor stumps, bad wiring, rusty pipes, there are literally dozens of problems both big and small which could give you a nasty surprise. It’s not just what could go wrong, it’s also you being able to sleep at night without worrying about what could happen with a portfolio full of older houses. We have also found that tenants often prefer to rent property that is neat, modern and easy to look after.
6. Paying too much
This is a strange mistake because paying too much probably won’t hurt you too greatly in the long term. After all, as long as you’ve got the right property in the right suburb, you’ll enjoy substantial capital growth and excellent returns. However, where it can really hurt you is speed. As an example, let’s say you paid $40,000 over the market value to secure a property, it could take 12 months before you’re back on par. But if you pay $40,000 under market value, you’ll be 12 months ahead with equity already locked in to use to fund another purchase.
7. Going forward alone
It’s no secret that having an experienced mentor is a huge value-add to any current or future investor. The real win here is the time savings which occur when a team is looking after your portfolio for you. They will reap the benefits of investment without having to dip into the minimal free time they have available.
Over the last decade I have been fortunate to have helped thousands of Australian property investors on their journey to financial freedom. During this time my team and I have learnt that there are certain mistakes you absolutely need to avoid when investing in property for financial freedom. And in doing so, you will ensure your future success.
Interested in learning more about membership and the range of benefits you will receive? Get in touch with one of our experts today and discover how we will guide you and help you achieve your freedom through property.
Scott Kuru is one of Australia’s leading property investment specialists and is Founder & CEO at Freedom Property Investors.