7 Common Mistakes To Avoid When Investing In Rental Properties
Investing in rental properties is one of the biggest trends in the Australian market. It’s a long-term investment that’s known to generate consistent returns with minimal risk, unlike crypto or meme stocks.
However, when you begin your quest of owning a rental property, you need in-depth knowledge, time, and determination to get the desired result. Buying the right rental properties can help you make money.
But it won’t happen overnight. That’s why we’ve drafted this blog so that budding real estate investors like you can gain knowledge of the 7 most common mistakes to avoid when investing in rental properties,
1. Lack Of Research
You cannot skip research when you are buying your first rental property. Research can help you understand the market better. It can give you proper knowledge that can be crucial to devise a plan for your investment.
There are a few important areas that you should look at when researching for an investment property. You can start by:
- Getting more clarity on whether you want to invest in an old house or a new house.
- Doing a thorough inspection of the chosen house to gauge the condition and desirability of the location.
- Diving deep into the features and amenities that are available when you are buying the property to rent out.
Lastly, knowing what you’re getting into when buying your first house can help you identify the winners from the losers. Importantly, it can help you avoid those who are out to confuse you with misleading property claims.
2. Wrong Location
Location is one of the most important factors which affects your property’s performance. Current trends in Australia suggest that people are investing in apartments located in the suburbs for higher returns and better growth.
However, many beginner investors make the mistake of following the herd. Instead, there’s something predominantly important that you must look at if you’re on the quest for long-term growth from your property investment.
You need to choose a location where people with high disposable income reside. This factor is known to boost the property’s value drastically as there will be other homeowners vying to buy property besides yours.
3. Wrong Property
When you pick up the right location, it is also essential to find the right property in that particular location. Due to the covid, people are looking for more space and privacy in their place.
Historically, there has always been a relatively consistent demand for townhouses in Australia. However, you’ll also need to find a property that shouldn’t cost you a fortune in repairing and maintenance.
Thus, when you are inspecting the house, do it thoroughly to avoid any discrepancies. Moreover, investors have been known to buy property where the demand is more than the supply because the price is likely to surge.
4. Absence Of Property Investing Strategy
When you are going to invest in rental property, the first thing you need is what type of property will help your situation. A low-cost property will always give you low returns but will be easy to buy.
However, the high-cost property is known to generate higher returns, and it’s difficult to gather the capital for. Thus, you need to develop a strategy on which property you must invest, depending on how much you can.
Why? Because you don’t want to end up in debt of owning a property. In the end, it is the capital growth of the property that will help in the future.
5. Opting For The Wrong Financing Plan
A successful investor uses finances diligently to buy a property. There’s more. They also use their acumen to buy time for the property so that it can sail through periodic ups and downs.
You need to plan the worst-case scenario when drawing up a financial plan for your house investment. It’ll help decide your daily financial expenses regularly and the principal & interest when you are applying for a loan.
You want your property to give you high returns, and you have to make a valuable financial plan.
6. Emotional Decision Making
As an investor in rental property, your goal is to make money. Thus, when you are buying a property, it’d be wise not to buy it because of your satisfaction, like you loved the house or the house reminds you of your hometown.
When you are investing in a property, you need to think about the profits and how much return you can get by investing in the property. You have to focus on the capital growth and the demand for living space in the particular area.
When you get emotionally attached to your property, you end up paying off more. Thus, it’s best to never make a financial decision, especially one as costly as buying a rental property, emotionally.
7. Not Consulting With Property Investment Experts
A property investment expert like Quarter Acre will help you to maximize your return on the property you want to invest in. They’ll help you:
- Devise a proper plan to structure your finances
- Choose the right location and the right property
- Curate the investment depending on your needs and profile
Furthermore, property experts are known to assist with defining your primary and secondary objectives and help you to achieve them most cost-effectively.
The help of experts is required when you face an extreme situation and don’t know how to proceed. Thus, you should always consult your expert before making a decision.
Conclusion
Investment in rental properties is a great way to secure your future financially. However, you should be prepared for the worst things to happen. You should have enough backup to keep you going in your worst time.
Lastly, don’t be afraid of the risks of investment. You need to study the market constantly and be proactive to take what the market is offering you. At the same time, you should keep your numbers checked regularly.
The biggest risk today is not to invest at all.
