Everyone wants to be a property investor, but the reality is that you need to be informed, crunch the numbers, and stay calm before taking the leap.
Here are some key mistakes people make when investing in property for the first time:
- Jumping right in before doing some research
- Borrowing to their limit and don't consider future changes in the lending market
- Choosing the wrong location or property – does the property need renovating or work to be completed prior?
- Making decisions based on emotions
- Relying on rental income to pay expenses
- Possible tax deductions – You cannot claim the works prior to the tenancy starting
- Neglect thinking about the long-term strategy.
1. Research
Consider all factors that can contribute to your investment success. This includes inquiring about the area of where your property is located, evaluate the local real-estate market, know the city's plans for the neighbouring area, understand the demographic of the location, investigate any termite or flood history, consider appliance replacements, and distinguish the proximity of schools, grocery stores, hospitals, beaches, shopping malls, restaurants etc. Also, researching before rushing into the purchase of the property can prevent mistakes such as choosing a property that limits the rental return and capital growth potential.
2. Underestimating Expenses and relying on rental income
If you intend on moving tenants into the property straight away or make improvements to your property, it is essential to have a budget that goes towards unforeseen expenses of your property investment. This means to not borrow to your limit when initially purchasing the property, not relying on all your rental income, and allowing a buffer in case improvements or replacements are needed.
3. Making Improvements Prior to the Tenancy Starting
To claim back the expenses from your renovation, it is more advantageous to make these improvements after the tenancy agreement is in place, for example, installing an air-conditioner or dryer. By implementing a condition report once the tenant has signed the tenancy agreement, improvements to your investment property can become a deduction. Also, planning for these expenses and letting the tenant know of these improvements is crucial, as well as completing these jobs in a certain timeframe.
4. Team of Professionals
Property Investing is quite stressful and requires a lot of knowledge from areas such as finance and real estate, as well as and all the documents that are required in the process. Having a team of professionals will ensure the best returns and management for your investment property
- Mortgage brokers: Will assess your finances, compare home loans, and find options that suit your situation, and manage mortgage applications through to settlement.
- Solicitors: Handles all legal aspects and documents when buying an investment property
- Accountants: Assess your budget and taxes, how to pay off your loan ASAP and guide you on how to plan for rate changes.
- Property managers: Property managers will organise, supervise, and manage the leasing of your property. This includes handling rent from tenants, scheduling repairs and maintenance on the property, maintaining landlord-tenant legislation, screening tenants, and overseeing all communication from both tenants and the landlord.
if you're searching for an award-winning Property Manager for your investment property, our Century 21 Newcastle team can assist. Not only do we leverage technology to obtain our clients the best possible results, but we're backed by a strong marketing strategy and a dedicated team that exceeds expectations. For a free copy of our Property Investors Guide or for an obligation-free chat, email our Director, Casey Healey at casey@c21newcastle.com.au or phone 02 4928 7400 today.