How to avoid the top 4 mistakes, made by beginner investors
There are many potential pitfalls and challenges along the road to property investment success.
The advantage of being a novice investor in today’s world is that plenty of others have already made the mistakes for you. Learn from these simple yet common mistakes and investment portfolio will be off with a running start.
Mistake #1: Not having a plan! Get started as quickly as you can but make sure you have a clear strategy. Property is typically seen in Australia as a stable investment but unfortunately this doesn’t mean that just by purchasing any property you will generate a sufficient return. Property type, location, rental yield and growth prospects must be matched to your objectives. Investing in the right property is the foundation of a successful portfolio; consider if it will earn you a regular profit or leave you out of pocket and it’s ability to enable you to invest again within 12 to 18 months.
How to avoid it: Firstly, start by clarifying your goals. What do you want your investments to do for you? Do you want them to enable you to retire early? Fund an overseas holiday every year? Build your dream home? How much income do you need your investments to generate for you to reach your goals? Once you have this information, enlist the advice of a property strategist. They will match your personal situation and goals to properties that will help you achieve them.
Mistake #2: Failing to maximise your borrowing position. This is one of the biggest obstacles to rapid portfolio development. Many investors are attracted to the simplicity of dealing with their usual bank. They fail to realise how much their borrowing capacity can be affected by dealing with a single lender and how much it can differ between lenders.
How to avoid it: Shop around for a proactive mortgage broker who specialises in property investment. Along with your mentor, they will become a critical part of your investment ‘team’ – and the best part, they don’t cost you anything.
Mistake #3: Trying to self-manage a property in a location where you don’t reside. The best investment opportunities are unlikely to be close to where you live. To maximise returns and mitigate risk you need to take a nationwide and diversified approach. This often means holding property thousands of kilometres away from where you live. Trying to self-manage to avoid agent fees all too often ends in disaster. Unpaid rent and a poorly maintained property will soon cancel out any savings you have made on agent fees.
How to avoid it: Use the local experts. A good property manager won’t feel like a drain on your return. They will have a good corporate leasing client base, know how you can achieve top rent and most importantly, provide you with piece of mind that your asset is being well managed and maintained.
Mistake #4: Lack of long-term support. It is very easy to get ‘lost’ on your investment journey. It requires a disciplined, business-like and persistent approach. A lack of support in these areas is why many give up if things don’t go exactly to plan.
How to avoid it: Like a mortgage broker, an investment strategist or coach is a vital element of your support team. These are the people who have done it all before, and very successfully. They will provide ongoing assistance to ensure you stay on track, maintain motivation and reach your objectives.
Make the most of the professional services available to you. Taking advantage of these resources and learning from others’ mistakes will ensure you’re in the best position possible to maximise and fast-track your success.
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