I owe much of my financial security to real estate property investment. Having worked in real estate my whole life (well – since I was 15, so it feels that way!) it’s what I know and it’s also what I love. But it’s not for everyone.
Here are my top six mistakes you could make when buying an investment property:
- Borrowing an amount that’s going to stress you financially to repay. This is the bottom line. People’s circumstances change: you could lose your job; have a child (or another child); have an extended period of vacant time; or interest rates could dramatically change. Are you prepared for that and will you still be able to (comfortably) afford your investment property?
- Not having the appropriate insurance. I call a specific landlord protection insurance a ‘sleep easy’ policy. While it doesn’t cover you for everything, it sure covers you for a lot more than your building insurance with a tack-on landlord component and is a must – especially for owners with only one property.
- Having a property manager who doesn’t wait for the right tenants and simply puts in any old tenant. Correct tenant selection eliminates 90% of all future problems and you need a property manager who understands that.
- Worse still – managing the property yourself. You could do your own appendectomy if you wanted to, but you wouldn’t. Many privately managed properties attract worse tenants, aren’t inspected regularly, the tenants aren’t reference-checked, have leases which aren’t up to date, and condition reports that aren’t adequate.
- Don’t listen to the sales agent. With all due respect to my wonderful colleagues in the sales side of real estate – their job is to sell you the home. Confirm any rental projections of any form (projected rental price, likely tenant etc) with a specialist property manager. In the same way that I, as a property manager could tell you what your home may sell for – it’d be nowhere near as accurate, reliable or researched as if you went to someone who did that job function all day every day.
- Buying a property and becoming a property investor if you’re not mentally prepared for it. I have clients right now who know they’re not made for being property investors. They’ll sell their homes when the market is right for them and never look back with a moment’s regret. A property investor has to be able to have a good level of emotional distance from their investments. Own a property long enough and you will have tenants who do not respect your investment. Own a property long enough and you’ll have (even with great tenants) damage done to your investment. There will be times when the gardens aren’t done perfectly or the internal presentation isn’t up to scratch (isn’t it this way at your home at times, too?) and if you drive past your investment property all the time you will see these occurrences.