So you’ve worked hard and now have some spare money to invest? Or perhaps you have inherited some money or made a good return from a previous investment? Real estate is the investment that most people still recommend; however, unfortunately few people actually start with a well organised property investment strategy.
The most common reasons for flawed investment strategies:
Following the wrong advice. They say advice is better given than received. It can come from family, friends or even so-called professionals providing property investment advice, but it can sometimes be seriously flawed.
Carefully double check the advice you are getting by using the tried and tested due diligence techniques, checking property investment guides and by questioning anything that you do not understand.
Ask about the experience or qualifications of the person who is giving you advice on property investment and do not be afraid to ask for concrete proof. They will need to be experienced enough to provide you with a water-tight strategy for investing in property if you are to succeed. What is their history and do they have any experience of the option they are recommending to you? And do they have previous, satisfied or dissatisfied clients?
Letting emotions rule your head. This is a common mistake, particularly if you are new to property investment and have not sought professional property investment advice. You might be starting out and buying a first home with a partner. Emotion is okay sometimes, but not when purchasing a property!
Make sure you are buying in the right area, ie. not only a property that “feels like home”, but also one that shows opportunity for growth and one that is close to local services and amenities. Do not be impatient and become enchanted by the first properties you view, without doing vital due diligence first.
Jumping on the bandwagon. Another common, human error. The fact that other people are purchasing in a particular development or area, does not necessarily mean that the investment is right for you. Yet again, examine the proposition carefully, and research the area and your investment property strategy before making a commitment to buy.
Remember, the very fact that people are buying means that prices will be on the up. The trick is to find a location before everyone else does; a hotspot, ready for investment at the lowest price possible, thereby attracting maximum capital growth for the future. Once everyone has jumped on the bandwagon, you will already have missed out on achieving maximum returns on your investment.
Forgetting to do all your sums. This comes largely as a result of following your heart and not your head. Do all your calculations and that doesn’t just mean adding up your buying costs. You will need to factor in ongoing expenses relating to routine and unexpected maintenance, bills, local taxes, community charges and possibly more. These costs easily add up and can eat into your savings, even forcing you to get into debt to pay them.
Ignoring the worst case scenario. If you are buying to let you will need to factor in any void periods when you will need to pay the mortgage and bills. Whatever the exit strategy of your property investment strategy, you will need to carefully examine the worst case scenario should you not achieve what you aim to do at the time you need to. A wise investor always has a plan B to keep him/her out of serious debt for the time it takes to achieve his/her investment objectives.
Buying worthless bmv property. There is often a reason for a low price and it is not always a good one. If the property is in poor condition and in need of renovation, get it surveyed carefully before your buy and factor in the cost of repairs, along with an amount for unforeseen expenses – they may increase the cost of your purchase to such an extent that buying bmv added no value to your investment. Equally a poorly located bmv property is likely to be difficult to rent or shift in any market.