Investors everywhere are trying to capitalise on the surging demand for rental units and here at InvestmentProperty.com we help you succeed at this. Many are in a rush to snap up properties in order to boost profits and build their portfolio.
This phenomenon is one of the effects of stock market volatility. People are looking for alternative forms of investment and property is becoming the preferred option.
If you are new to this game, you should try to get familiar with common rookie mistakes so that you can avoid them. Although there is plenty of money to be made from investing in property, there are also a lot of risks in this sector.
With this in mind, we have put together the following list of errors and pitfalls frequently encountered by beginner investors:-
1. Making the wrong purchases.
This mistake happens all the time, particularly to those who are used to dealing with abstract investments like shares of stock that they can just check online.
Brick-and-mortar investing is a different animal altogether. The mind-set has to change as there is now a physical construct that requires careful evaluation.
Put yourself in the shoes of the potential renter. Would you want to live in the unit? Is it in a convenient location? Is there enough space for your needs?
You need to think of your target market as their requirements will differ from yours. After all they are ones that will be living in the property. Families will need a bigger space whereas students are more than happy to live in a more compact environment.
2. Failing to study the market.
You should never invest in something that you aren’t knowledgeable about. Within the property market this means you should have some basic knowledge of the local area in which you are looking to buy. Checking out the statistics around the local market is essential.
This will allow you to find out the pertinent details about your potential customers including who they are, what prices they are paying, and how much of a demand there really is.
Look up the demographic details of the surrounding communities. Are there lots of schools in the area? Is it near a business district?
Finding out all these details may seem tedious but smart property investors know that by doing so, you will better be able to tailor your property purchases to the facts gathered.
3. Lacking emergency funds.
If you are holding properties for a good amount of time it will inevitably mean that you will have to deal with maintenance and repair at some point. While regular maintenance work is predictable, you can’t know in advance exactly when repairs will be needed.
That’s why there should always be money set aside for these instances so that you can deal with them quickly and effectively when they come.
You could implement a system wherein the rent payments are directed into a bank account separate from your other accounts so that there will always be a ‘dipping fund’ available where you can source funds when you need them.
4. Shouldering all the work.
Getting a property ready for the rental market is hard work. Lots of people are tempted to go the DIY route to save money but this will only work if you are an experienced contractor yourself. Otherwise, you are unlikely to pull off all of the needed repairs successfully and efficiently.
It’s always best to stick to your core competency and leave other tasks to the pros. By outsourcing most of the work, you will be able to maximize your time doing more productive things and earning more money. Besides, the pros know lots of cost-saving techniques. Take advantage of this.
5. Charging without looking.
When opportunities come along, it’s tempting to reach out and grab them before they disappear. However, not all that glitters is gold and mistakes can be very costly.
Do your research before saying yes to anything otherwise you could end up losing a lot of money in ‘garbage’ property buys.
As mentioned earlier, getting familiar with the area you intend to buy in essential and another way to do this is to talk to other trusted investors who are already acquainted with the area to get their input.
6. Disregarding the competition.
Keep an ear to the ground. You must know what others are doing in order to keep up. They might be offering lower rates and attracting more tenants that way.
They could be enhancing their facilities to differentiate themselves from the rest of the neighbourhood. Check out their advertising materials and study their methods to see what works and what doesn’t.
Keeping tabs on what your competitors and bigger players in your sector are doing can often time be a good research tactic and one that savvy investor do regularly.
7. Ignoring insurance.
Things can and will go wrong at different levels. It always helps to be covered by landlord insurance when they do.
Avoid loss of income from massive property damages. Be sure to study the fine print so you know exactly what you are paying for.
Avoid rookie mistakes by following these tips and you’ll be buying investment property like a pro in no time.