When it comes to investing in property, there’s a lot of information out there online, in print and on TV. Some of the information is good and helpful, others less so and misleading. In fact, in our opinion, much of it creates a false impression of how to invest in property and what’s really involved.
Rather than telling you what you should be doing, we’ve put together our hard-hitting guide to what not to do when you’re investing in property this year. Hopefully, we can help you understand the reality of what’s really involved and how to avoid common property investing mistakes so you can succeed with your property portfolio.
Don’t set unrealistic property goals
Property programmes and articles often promise great returns from investing in property, but in reality, they’re too good to be true. False information and promises sadly result in investors eagerly piling into high-risk investments to achieve goals that are unrealistic and should never have been deemed easily achievable.
Before you start investigating property investments, be realistic about what’s really achievable and set yourself sensible aims. Unrealistic property goals are only going to end in disappointment.
Don’t invest in property purely for high yields
It’s not a good idea to invest in property purely for the aim of achieving high yields. In cases where you get a higher yield, the yield is better because the market thinks you’re taking a bigger risk.
The perceived high yield is either generated by a low property price due to a lack of buyer demand for the property or area (meaning it will likely not rise in value and will be harder to sell in the future), or rental figures that are over-inflated and not realistic.
Instead of focusing on high yields, look for property deals that offer long-term capital growth and consistent rental return – these are the types of purchases that are really worth investing in.
Don’t do anything until you have spoken with an accountant and tax advisor
As with starting any business, building up a successful property portfolio requires plenty of planning. Before you even start to look for a property to purchase, you need to understand the basic business elements involved, such as what tax you’ll be liable to pay, how you’ll finance your purchases and your cash position.
You need to have an overall plan in place that you can follow and be sure that you know exactly where you stand financially. If you’ve not spoken to an accountant or tax advisor yet, don’t go ahead with buying a property.
Don’t get caught up in trying to find ‘below market value’ properties
Below market value (or BMV) properties are below the standard market value for a reason. On occasion, they might be a good investment, but you need to ask yourself why the price is so low. Would someone really be selling you property for that price if it was a great investment?
There will be a reason why the property costs less and this reason will likely balance the books. For example, it may need considerable work and money spent on it, and it might not be a property that can be mortgaged or it may have a defunct lease. So don’t get caught up in the hype regarding below market value property buys and learn to identify a truly good deal.
Don’t ignore the time investment that you might be committing to
Many investors are naturally attracted to the idea of becoming a property investor or buying property to flip for a profit. However, they fail to consider the labour-intensive nature of these investments. Investments that require development, money and work, often require a heavy time investment too and this can’t be skimped on.
If your original goal is to create a passive income, this is quickly negated when trying to balance a property investment project with a day job. All too often the profit an amateur house flipper may make from such a project isn’t a just reward for the risk, time and money that has gone into it. Before you put your hard-earned cash into property, make sure that you know everything that’s involved and the time you’ll have to commit to making it a success.
What to do to invest in property
If you are serious about investing in property, have done your financial homework and are in a position to get going now, stick with us. At Source Property Investment, we specialise in providing a full service to guide you through every stage of growing a successful property portfolio. There’s no hype and no false promises, just real facts and practical advice.
Sound interesting or want to know about what’s involved? We’re here to help. Get in touch with us today to discuss your requirements and embark on your property investment journey.