Top five mistakes property investors make
There are many mistakes that can be made by novice property investors. These are traps for young players to watch out for:
1. Buying with your heart, not your head. Far too often people purchase property based on emotion rather than cold, hard facts. For example, I have seen too many people buy brand new apartments just because they look good. Looking good doesn't mean it is a good investment. The fact that it has an infinity pool on the 10th floor is great for your tenant who will be enjoying it but you, as the owner, have to pay for it through maintenance, repairs and running costs.
2. Fear of missing out (FOMO). When the market is running hot, many inexperienced people will buy property as they are worried they will miss out. If you have a short-term goal, buying when the market is already booming may not be the best strategy. You don't need to worry about missing out as there are plenty of properties for sale; you just need to buy the right one, not the first one you see.
3. Analysis paralysis. This is the opposite of FOMO. I have met many people who have been interested in investing for many years but have never bought a property. Why? They spend too much time analysing statistics, the market and the property cycles that they eventually convince themselves it's either the wrong time to buy or they never find the right property. You don't need to be a genius to invest in property. Do your due diligence or get someone you trust to do it for you. Remember, you actually need to buy property, not just think about it, if you want to make money.
4. False bargaining. Most people think that if you can buy a property below the asking price, it is a good buy. Wrong! If you bought a property for $500,000 when they were asking $550,000, it is not a good buy if it was only worth $450,000. Buying a property with great potential for $450,000 when they were asking $450,000 is a much better purchase. Just because you can bargain the price down doesn't mean you will finish up with a bargain.
5. Taking unqualified advice. Due to the money that can be made in property, it can attract rogues. Many organisations run sessions they label "property education" seminars but they are just hard-sell presentations. Before you buy, either educate yourself and/or pay a qualified property investment adviser.