As a new (or even seasoned) property investor the whole investment process can be overwhelming. Without the proper preparation and homework things can go downhill…fast.
With over 20 years of property investing experience I’ve seen just about every mistake a property investor can make. Some big, some small. But with every mistake has come significant learning.
So today, I want to share with you the 12 most common property investing mistakes I’ve seen, and how you can avoid making them…
1. Buying at the wrong time in the property cycle
This is a very common mistake and comes about through not educating yourself. This is a simple mistake that can cost you big money. Buying too late in the cycle costs you potential growth profit of the property and buying too early can bring your investing to a grinding halt as you may need to wait a long time for growth to occur and equity to be gained to use for another purchase.
2. Selling too early
This can again be avoided through eduction and patience. Watching the markets carefully and making the decision to sell when, and if, the time is right for your investment portfolio is key to the longevity of your portfolio.
3. Not educating yourself to take control of your decisions
Failing to continuously educate yourself on intelligent and safe investment practices increases the risk of your portfolio failing. It’s that simple.
4. Wrong finance structure
The wrong finance structure has the capacity to cost you both money and time. Finding a finance broker who has a thorough understanding of, and belief in, property investing is so important. Take your time to find this person. Make sure they are someone who comes well referred from people who are currently investing and that you communicate well with them. You will be spending a lot of time dealing with this person so it’s helpful that you work well together.
5. Incorrect buying strategy
The right strategy for your portfolio is a personal decision. There are many factors that help determine the best strategy for you such as income, assets, goals and the mindset of the investor. Choosing the wrong strategy can inhibit the realisation of your goals and cause you financial and emotional stress.
6. Not having the best possible team around you
Put simply, if the people working around you don’t have the knowledge, experience and passion for investing that is required you will encounter difficulties. Do the research. Ask questions. Don’t be afraid to ‘interview’ your brokers, solicitors, accountants and the like until you find the best possible fit for you. These people will be working for you and have the capacity to significantly affect your financial position so take this process very seriously and don’t stop until you get it right. Also, don’t be afraid to replace people in your team who are not meeting your requirements.
7. Listening to ‘uneducated’ investors & mainstream media
Don’t fall into the trap of most amateur investors and take the wrong advice. Generally, when the general public are telling you to invest in a certain area, it’s already too late to buy there for peak investment gains. Likewise with mainstream media. There is always an element of shock value and hidden agenda present in common news stories so take these with a grain of salt and continue to research and educate yourself form reliable and valid resources.
8. Paying too much tax
Your accountant needs to understand property investing. Having someone who understands property can mean thousands of dollars back in your pocket come tax time, which could be the difference between another property purchase or not. I have a personal example of a $40K difference in tax estimates by two accountants.
9. Holding too much bad debt
Too much ‘bad’ debt such as your Principal Place of Residence loan, car loans, personal loans and credit card debt can limit your capacity to borrow money and therefore affect your buying power. These debts can be hard to avoid, but for the future of your investment career, it is important to try and pay them down as quickly as you can and avoid taking on excessive or unnecessary new debt.
10. Buying ‘local’ or with emotion
A wise investor will expand his or her horizons and not just buy in their backyard market. Investing away from the area you live in means you will diversify your portfolio and not be over exposed in the one market. It will also force you to learn more about investing as you will be researching new areas and will remove the temptation to use emotion instead of figures to buy and investment property.
11. Work/Life balance not working
There is no point trying to build your wealth and financial freedom if you are too unhappy and unhealthy to enjoy it. Throughout the process it is essential to place the utmost importance on your health and wellbeing. If this is not working, then nothing else will.
12. Not expecting Roadblocks
Your investing journey will not always be a smooth process. Expect some obstacles to overcome and attack with the right mindset.
If you’d like to chat any of these points through, contact me direct by clicking here. Any other questions? Give me a shout…
Cheers,
John Pidgeon
Head Property and Business Educator
SOLVERE
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