Property investment is a major financial decision and it should be given the due respect by avoiding the deadly sins of real estate investment. If you are looking to expand your investment portfolio in the property sector, these are the cardinal sins you must avoid at all costs:
1. Not Researching about the Competition
You must not buy a property for earning a rental yield income in an area where there is already too much of competition. Not researching about the competitive marketing is a mistake that you need to avoid if you want to achieve a long-term growth in the property market. Create a list of the over supplied areas as these will be saturated and the capital growth will not be sufficient and you will not gain enough home equity for future investments.
2. Not Conducting a Market Analysis
Property investors should always conduct an extensive market research and analysis. The research should not just be pertinent to the home or the building but it should extend towards the neighbourhood, the crime rate, the housing market, infrastructure and developments, educational institutions, and recreational amenities.
3. Buying a Dilapidated Property
Buying an old property is never free from risks. The structural integrity of the building is always going to be questionable. You may think that you are making the best deal but in reality, you might end up paying more in the maintenance. Investing in a new property will give you the benefit of the construction company’s warranty. Investors can also claim tax benefits on depreciations.
4. Not taking the Help of Professionals
Property investors cannot do everything on their own. They need to work in collaboration with several different professionals, such as:
- Research analysts to find out everything about the property and the area for capital growth;
- Insurance agents to know whether they are underinsured or not;
- Attorneys to verify whether there are any flaws in the easement or the title; and
- Home inspector to detect the structural and superficial defects in the building.
5. Falling in Love at First Sight with the Property
This is huge sin and it must be avoided at any cost. Yes, you have a certain predetermined criterion about how a property should look like. But, you should consider the future prospects. Especially, if you want to rent the property, then you should ask whether the tenants would want to live in the suburb you are buying the house in. Look for the amenities that people essentially look for in the surrounding areas of the rented property, such as public transport and amenities like shopping hubs.
6. Not being Realistic with the Math
The one thing in property investment that will dent your prospects badly is under and over estimation. You need to be really good at your math to calculate whether you should go for the interest only loan or principal and interest loan, determining the future value and the repair or maintenance costs. Since only the loan is tax deductible, most investors opt for the interest only loans. Therefore, you should consider the full buying cost when you are estimating.
7. Choosing the Tenant without the Help of the Property Management Company
Dealing with a bad tenant can withdraw your faith from the passive income of renting the property. Therefore, you should take the help of a property management company when you are selecting the ideal renter. My Property House provides property management and research analysis, which will help you in discovering the tenants and the area for capital gains.
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