Learning from the mistakes of others is a great way to become a successful property investor. Here’s a list of what to avoid on your way to the top
1. Putting if off
Too busy’, ‘too risky’ or ‘not the right time in the property cycle’ are common excuses for not taking action, but in reality there may never be a perfect time. Live by the slogan ‘never put off tomorrow what you can do today’.
2. Not enough research
Look at multiple properties and do financial analysis on many properties before committing to buy. Remember the real estate agent is there to sell the property so although they can be a good source of information, don’t rely on their word alone.
3. Getting emotionally attached
Don’t picture yourself living in the property; instead keep your thoughts focused on the big picture: ‘can I sell this property at a higher price?’; ‘will this property be popular with tenants?’
4. Over-extending your finances
You are investing to improve your life, not to end up with a mortgage that is too high. Circumstances change and your finances need to be ready to deal with an unexpected blow like losing your job, a period of rental vacancy or a rate increase.
5. Not having the appropriate insurance
Landlord’s insurance can cover you for not only damage to buildings and contents, but also for rental default and damage by tenants. Make sure you read the fine print because cover and service can vary significantly between policies.
6. Not using the equity in your home
Using the equity in your home to buy an investment property reduces your reliance on savings. Equity is the difference between your home’s market value and the balance of your home loan. Typically lenders will allow you to access up to 80 per cent of this equity and use it as a source of credit on your mortgage.