Property’s position as Australia’s most-popular investment has been boosted by booming house prices but many investors are making costly mistakes.
More than 2.2 million people own investment properties, according to 2021 data.
Outlined below are the five common mistakes made by beginners, and sometimes by experienced investors too:
Investors who don’t get loan pre-approval can find themselves in a bad bargaining position.
And borrowing to the hilt for investment property number one is not the best way to start a portfolio because it leaves little room for growth.
Understanding your finance limit is crucial, as is a property’s income and expenses.
Lower income earners should also buy higher cashflow properties so that they can repay the mortgage easily but also create higher serviceability.
Getting advice from family and friends may be outdated.
Family and friends won’t know all the changing tax rules, and you should avoid property spruikers who have their own agenda.
Real estate specialists often recommend surrounding yourself with experts including mortgage brokers, accountants, solicitors and buyers’ agents.
A property investment should be a business decision, so take emotions out of the equation – especially when choosing suburbs.
Many first-time investors wrongly buy in a location they personally desire, even though they never plan to live in the property.
Find a vacancy rate which is low in an area expecting population rise, with little housing availability and large employment support and ultimately, this will result in high demand.
Property markets move in cycles and they vary between states, so try to avoid buying at the top of a boom.
Not knowing the market can lead to overpaying and buyers need to do research around what properties have been selling for in their local area so they know what true market value is.
Many people buy in their own suburb but this goes against the important investment rule of diversification.
Where investors live might be good for lifestyle but may not be a good area to invest in and may be out of their budget.
So, attend auctions and speak to real estate agents as part of doing your research.
Buying without a strategy is a mistake. Investors should know why they are buying the property and how it will help them with their goals.
Often people don’t know what they are trying to achieve and beginners should also know their exit plan, even if it’s decades away.
Tenants have more rights than investors realise and investing in property isn’t a set-and-forget financial exercise and you need to remain up to date with regulations.
Do your research before jumping in – mortgage options, interest rates and the market.
Have short- and long-term goals when investing. These can change with time.
Consider finding a good property manager.
Monitor income and expenditure on the property throughout the year.
