Are you a property investor feeling like you're getting nowhere?
Or are you new to the industry in need of guidance?
Property investors often fail due to a lack of solid property investment strategies. Worse still, they spend time and money focusing on the wrong investments.
Success often comes after many trials and errors. But we're here to save you some time and show you the strategies you should avoid.
When investing in property in Australia, there are various property investment strategies that you should avoid at all costs.
Read on to find out which investment strategies to stay clear of for more successful investing.
1. Buying the Wrong Property at the Wrong Location
This mistake is often made by investors because they look at the property as owners and not landlords. You, as an investor, should mainly focus on the cash flow and growth potential.
This isn't your dream home, but an investment property that will accommodate tenants.
Renter's needs are very different from those who want to buy a home. You need to invest in property that will be attractive to them.
People who are in the market for a rental property usually want a comfortable home that's affordable in a nice area.
When looking at a potential investment property, ask yourself some simple questions. Who is your target demographic? Is this property attractive to families or single people?
Is the area attractive for people who want to rent and not buy? Don't think about your taste and needs, but think of how the property will have a good rental yield and capital growth.
2. Impatient Property Investment Strategies
Buying investment properties doesn't happen overnight. The process requires loans, paperwork, and money. Therefore results don't happen as quickly as you'd like.
Hoping for a quick turnaround is a poor property investment strategy. An investor should hold on to the property for at least 7 years, in order to see capital growth.
If you want to invest in property to get rich overnight, this might not be the strategy for you. Not only do you have to be patient, but at the same time, set realistic expectations for growth and passive income.
Have a vision for long-term investments without neglecting your short-term needs. This is where many investors fail because they lack long-term vision.
Financial independence from your investment property is key, which leads to our next point....
3. Lack of Emergency Funds
Nothing ruins a property deal faster than poor financial preparation. By now you're well aware it takes time to see profits when you invest in properties.
An "emergency fund" should not be optional. You don't know what unexpected costs could surface, and not having spare cash limits your options and places you in a position of stress.
Think of ways you can have another source of income to maintain unexpected expenses until the property produces residual revenue.
Don't dive into a new project until you feel financially secure with the previous one. A mature investment property could provide the emergency cash for the next one.
Many things out of your control could go wrong with your next property because it's difficult to predict every single issue. Having a well thought out and proven risk management plan is vital.
Renovations almost always take longer than expected, which can leave you paying a mortgage on a vacant property.
4. Spending Too Much on Renovations
As an investor, you need to think about renovations with profits in mind. Smart property investment strategies are created to drive profits forward.
Think about why you're renovating. Are you refurbishing an old industrial building into a loft that will bring in young professionals or artists?
If you replace old kitchen appliances for new ones, will you attract more families? When renovating, think how a certain style will bring renters to your investment.
Are your renovations based on a marketing plan or based on your style?
Let's say you got a fixer-upper. You could cut down on costs if you put some of the work in yourself - only if you know what you're doing... otherwise it will cost you thousands of dollars to rectify dodgy works!
5. Not Using a Professional Property Manager
You're an investor, but do you know anything about managing a property? Using a professional property managing company might not feel like a great decision due to the cost. Thinking like this is fraught with danger and a poor person's outlook. Pay the money and provide yourself with the piece of mind.
Property managers are experts in finding qualified tenants and facilitating maintenance.
They will take care of signing all the contracts and protecting you and the tenant. While you focus on what you do best.
6. Rushing vs. Over-analysing
Jumping to buy the first property you see might be risky. And not buying a great property because you might find a better one is counter-productive too. The latter is called 'analysis paralysis'.
Effective property investment strategies are well researched.
When you're in the investment property game, rushing into a property could cost you a lot of money, and many headaches. You might rush because the opportunity is thought to be too good (to be true). Or the market might go up and the property is taken from you.
These are valid reasons and you can still acquire a great property, as long as you take the time to do the research.
Once the research is complete, pull the trigger and buy the very best property you can, filled with confidence that your're going to get great tenants and capital growth will take place.
If you see a great property that fits your budget and it is what you had in mind, don't hesitate to make an offer. As long as you do your research, you can reach for the right opportunities.
7. Not Getting the Right Insurances
You need to insure your investment property a different way you would your home. As a landlord, you need to be protected against rent default, legal liability, theft, damage and vandalism.
Not having the right insurance for your investment property could cost you thousands of dollars. Combining all your investment properties into one plan could save you more money and add more protection - known as a multi-policy discount.
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Before You Go
We feel confident that with these tips you'll be able to save some time avoiding property investment strategies that you need to avoid.
We are passionate about investing and we want to share it with you.
Get in touch with us. Leave us a comment and let us know which tip you found most useful. You can also sign up for our webinars.