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What Are The Common Mistakes Property Investors Make?
Investing in property can be extremely profitable, and for many people this form of investment can provide a solid source of income. However, to maximize profits you must buy property with great potential. A lot of new buyers have the tendency to invest just because a certain house looks attractive. The truth is managing property demands a lot of experience, time, and skill. A realtor can make the whole process run a lot smoother. Very few people want to deal with agents though.
Here are some other common mistakes people make when they want to invest in property.
Ignoring the costs involved
Investing in property doesn’t render immediate profit. Even if we’re talking about a form of investment meant to provide a passive income, the strategy demands active management skills to succeed. When you calculate investment costs, make sure to have current market numbers in mind. These guidelines will help you figure out what are the real costs of your investment:
Establish which type of rental is the most in demand
Find out if there’s currently a shortage or abundance of rentals
Check out the area, and assess if it is going through a growing or declining period
Find out more about the average occupancy rate
Establish whether or not renovations are in order before renting that property
Before making any purchase, adhere to the above mentioned guidelines. This way you will be able to identify a bad investment in the early stages of the process. The guidelines we just mentioned are also meant to influence the amount of cash you have to pay upfront, but also if the purchased property has potential of being cash flow positive.
Overlooking the risks
Property investment is a business endeavor that comes with certain risks. To succeed, you have to handle it with a specific goal in mind. A lot of people have cash, and they invest with the sole purpose of expanding their portfolio. They take risks because they can afford them. The average investor, who’s not that wealthy, can’t overlook the risks. In general, first-time investors have a hope – to benefit from capital appreciation in the market.
However, this can’t be the way to richness in the property investment marketplace. You’re taking a huge risk, and since you don’t have that much experience you might lose. Investing in property is not a short-term deal. It is important to have patience, as well as an exit strategy in case it is time to sell. Assess the numbers and take all the time you need to look at the numbers.
Not asking for advice from a professional
Many people believe they can just buy properties and sell them for a profit all on their own. This is a huge mistake. In this business, scammers abound. A house may look good on the outside, but underneath it can hide a lot of issues; the same goes for the papers. Don’t make the mistake of not reading a contract from top to bottom. A licensed property manager is an authorized agent, a professional in the field who can help you close the best deal.
Hiring a realtor to help you get into the property investment business is an excellent idea. This expert will provide great advice on managing tenants, paperwork and the property itself. A competent property manager will also offer useful advice on property law, and he will know everything there is to know about your rights and responsibilities.
Not paying attention to the dynamics of the market
Don’t buy the first property that looks interesting in the hopes of making a profit sometime in the future by selling it. It is important that you consider other available properties too. Assess the area, neighborhood, as well as utilities provided. Speak to the locals and invest in a property with potential. Potential is not limited to the house per see. There are other factors you must take into account.
Are there any good schools in the area? What about supermarkets, hardware stores, pharmacy, hospital, parks etc.? How safe is the neighborhood? These are important aspects you must consider if you want your purchase property to increase in value and turn into a profitable business.
Before making any purchase, adhere to the above mentioned guidelines. This way you will be able to identify a bad investment in the early stages of the process. The guidelines we just mentioned are also meant to influence the amount of cash you have to pay upfront, but also if the purchased property has potential of being cash flow positive.
