There are many things to think about as a beginner. Though you might have a checklist of all the things you should want to achieve, you’re also going to have to think about the don’ts of property investment.
These are equally, if not more important than the checklist you have put together – they will ensure you don’t make any errors when beginning the process. The following looks at the three major dont’s of property investment.
Achieving goals, or holding back, as a beginner property investor
With property investment, as a beginner, you will want to achieve one key goal. That goal is to increase your income. There are other goals that you might want to achieve too, such as paying off a mortgage with passive income.
But to achieve each of these goals, you will need not only need a strategy or plan. You’ll also need to know what not to do. So, here are three things that can stand in the way of these two property investment goals and should be avoided.
1. Purchasing a property without looking at the data
When investing in a property to rent, one critical factor you should avoid is failing to look at the data. What the data enables you to do is forecast/estimate your potential financial returns based on well-researched facts. The specific data you should be researching and analyzing includes:
- The location of the property and whether it will appeal to potential tenants.
- Statistics on the demographic of the area.
- Whether the property will give you a 10% return or above.
In other words, it’s no good selecting a property simply because you like it. You should set aside your feelings when choosing a property because the data is what counts and will speak for itself. It is essential and will contribute to your success.
2. Not handling your finances correctly
The other essential factor when buying a property to rent is how you handle your finances. Now, you have to think about whether you have the financial expertise to deal with the financial elements involved, or whether this would be better left to the professionals.
If you aren’t exactly an accountant or bookkeeper, your priority should be to look for a mortgage broker to help you navigate the financial minefield. A mortgage broker will prevent you from making errors with financial projections and help you avoid making any mistakes with your investment.
3. Forgetting to plan for a specific type of property
You might have your goals in mind when purchasing a rental property, but you are going to need a plan to help you achieve your goals. To achieve this, you will have to break your goals down into short-term and long-term goals and align your strategy with these ambitions.
Key to your plan are your financial objectives — both long term and short term — and you will want to track how you are progressing to optimize the financial returns you are achieving.
And, again, if you require the support of a mortgage broker to help you make shrewd financial decisions, you shouldn’t hesitate to seek their support. But what is also important is planning for the specific type of property you choose to rent out.
The specific property will affect your financial plans and objectives, so incorporating the property type into your plans is important. Are you planning to buy and rent out a strata property? A residential home? A set of offices? A strata property, for instance, will come with body corporate fees, which will influence your return and margin.
Achieve success with your rental property
Your objectives when purchasing a rental property are within your grasp, but to reach them you have to keep these points in mind. Remember to:
- Make a plan that takes your property type into consideration.
- Carefully analyze the data, including the demographics of the area.
- Think about your long and short-term financial goals with the help of a mortgage broker.
If you can keep these three tips in mind, you will soon start making a profit and achieving success with your rental property.