Property investment can be a promising way of generating income and creating wealth. In terms of the cash flow, it can be both a short-term and long-term endeavor. Just look on iproperty and you will find a plethora of property investment options available. Whether you prefer the long-term profits of an investment property, or the intended short-term profits in cases such as property flipping, there is no doubt that property is a viable and versatile investment vehicle that is sure to help you achieve financial freedom.
Although there is no shortage of information available about what budding investors should do, these do not necessarily guarantee the success in property investment. Rather than reading on tips and tricks on what you should do, perhaps it would be more important for you to know what you shouldn’t do in order to avoid becoming another statistic in the property game.
Read on for 10 of the most common mistakes that you as a first-time property investor should try to avoid.
1. Heart over head
Buying real estate with the intention of turning it into an investment property is very different from buying a home. Purchasing decisions in home buying is driven by 90% emotion and only 10% logic. This is, however, understandable since there is a personal connotation attached to owning a home.
Investing, however, is altogether a different scenario. Investment decisions should be made with your head and not your heart. Allowing your emotions to influence your purchasing decisions is a common trap that you should avoid at all costs. This helps you avoid over-capitalizing on your purchase and allow to make the shrewdest deal to secure the best possible outcome for your investment plans and goals.
2. Failure to plan is a plan to fail
As with any investment endeavor, you will need a set plan of attack in order to be successful in building a lucrative property portfolio. Setting out on your investment journey without a plan is akin to going for a road trip without a map. You’ll inevitably take a wrong turn and end up getting lost. So, have a plan of action and then put your plan into action.
For real estate to be a successful wealth creation vehicle, you will need to have a sound investment plan and set goals. Determine where you want to go, where you want to end up, and then devise a cohesive financial plan in order to get there. Work out what you want to achieve – whether it is short-term yields or long-term capital growth – and make sure your investment decisions reflect your overall strategy.
3. Diving in or dithering
Two of the most common scenarios with budding real estate investors are usually either acting too impulsively or being overly cautious and never acting at all. The former usually lose heart in the early sages and throw in the towel prematurely, while the latter end up facing paralysis by analysis.
Instead, the best thing you can do is to find a good balance between both. Make sure you understand real estate investment so you will be comfortable with the decisions you make, but don’t think that you have to know it all before you can even begin. Learning is both a journey and an experience, the same goes for investment.
4. Speculation over patience
Real estate investment is not an overnight results generator. People go into property investment with dreams of becoming overnight millionaires, thinking that it can be a quick fix to their financial issues. However, short term gains are usually more about speculation than true investing. Real estate lacks liquidity and thus is safeguarded from other more fast-paced investment vehicles such as shares. While many may view this as a shortcoming, it is actually a strength, as the tangible value of real estate makes it a commodity that everyone needs. This allows it to provide steady long-term gains.
5. Not doing research
Understanding property investment and real estate markets take time. Even the best experts are sometimes eluded by the cyclical nature of real estate. Rome was not built in a day. So, don’t have the expectations that you can just read a couple of articles online and have a full understanding of real estate investment.
6. Financing faux pars
While any layman can try their hand at real estate, there are certain aspects that are better left to professionals. As a beginning investor, you might not be as well-versed in the financial aspects. Thus, it is pertinent that you try to seek help from a financial broker. The reason for this is simple: they can usually point you in the right way to secure the right type of financing for your property investments. An incorrect financial structure can be detrimental to your long-term wealth-creation goals. Thus, a financial planner or broker can help you with the ins and outs of financing your investments and help you set up sound financial plans.
7. Saving by self managing
Many beginners think that they can handle it all themselves. You might have done all the groundwork and secured the perfect first investment. However, this is just the tip of the iceberg. Do not be tempted to fall into the trap of self-managing your own portfolio.
Think about it this way, real estate investment should be a passive income generator. As such, there is no reason for you to involve yourself too actively in the nitty-gritty aspects of it and treat it as a full-time job. Instead, hire a team of professionals to manage your property for you in order to allow you to spend your time better, such as looking at the bigger picture in order to generate more wealth.
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