Many new property investors make the same common mistakes, and they are easily avoidable.
Debbie Roberts from Property Apprentice shares some of the most common mistakes new investors make, and advises on how you can avoid making them in order to improve your chances of success.
1. No strategic plan (or the wrong one)
In order to reach your goals, first you need to know what they are. What is your desired outcome? What do you want to achieve from investing in property? Why is that important to you? What does success look like to you?
Once you know what your goals are, then you can start to work out what your purchase guidelines (sometimes called buying rules) should be.
What gross yield, net yield, return on deposit, cashflow, or type of property do you need? Do those purchase guidelines fit with your lending capacity (based on both available equity, and also your provable income)? Once you know what your purchase guidelines are, then you can set about putting systems together such as where/how you are going to find those deals.
2. Buying the wrong property
We often see new investors who have purchased the wrong type of property for their starting financial position, which can then result in them being unable to purchase anything else. This often prevents them from being able to achieve their goals. This is why having the right strategic plan in place is so important. When you are confident in your plan, you will have confidence in your purchase decisions. Then you simply need to do thorough due diligence on a property to make sure that you aren’t buying a lemon.
3. Incorrect structures for lending, tax and asset protection
Any mortgage advisor (mortgage broker) can set up a loan to buy a property, but there are very few mortgage advisors who understand the best way to set up mortgages for property investment. It is the same when it comes to accountants. Surround yourself with a team of professionals who specialise in property investment, so you can rely on the advice they give.
4. Inadequate insurance
Speak to an independent insurance adviser to ensure you protect both yourself and your assets, just in case the unexpected happens. As a landlord, we highly recommend you get the right cover for landlord protection insurance, in order to protect you for things that normal house and contents insurance (even with landlord’s extension) do not cover.
5. Not knowing what you don’t know
"If you are the smartest person on your team, your team is in trouble" - Henry Ford
Become an information sponge so you can continue to learn and to grow as an investor. You will never reach a point where you know everything there is to know about property investing, but having an experienced coach who you can contact whenever you need to, and a team of specialist professionals, enables you to learn from other people’s experience (and mistakes) rather than having to learn those lessons the hard way.
"If you think education is expensive, you should try ignorance."
This article is created for Property Apprentice