Don't Make These Buying Investment Property Mistakes
Why are you are considering property investment ... or if you are already involved, what are your plans and motivations?
For the majority of people you want a fairly secure way of making some more money. Investing in property in rental has two strong benefits: generally your property will increase in value increasing your net worth; you get rental income which covers your costs and delivers a profit.
That's the plan anyway. But too many people jump in feet first, relying on impulse and emotion to make decisions, rather than cold hard numbers. If you've already had experience with some kind of investing, you'll know that it only works when you "play the numbers". You must have a clear strategy, do your research and hedge your bets as much as possible. After all, one bad investment can devalue your whole portfolio.
If you are just starting out, start small. Don't go for the biggest building with the most rental potential. Start off with small properties while you develop your experience and confidence, but more importantly, your contacts. Remember, you will have to rely on others, so best to develop a team of reliable people around you now that you know you can trust when the big projects come along later.
Starting small means that the mistakes you make (and you will do), are affordable. You may not make the profit you imagined on your first property investment - but as long as you can break even, you've come out ahead. You've also come out hopefully with some confidence and realism that will take you forward. Reading all the books in the world does not make you a property investor - doing it does.
When you first start exploring properties, look for family homes, or perhaps large houses split in to two flats. These are generally much easier to deal with and rent out.
If you are buying an older property that hasn't been "touched" for awhile, you will want to check with the local council and building inspector what upgrades need to be done to make it suitable for renting. Remember, what you can get away with in your home is far more than you can get away with in a rental property. There are many many regulations that have to be met - don't try to skimp here - you'll just have to pay more down the line, and if something did go wrong, your insurance would be invalid.
Always get potential properties inspected by professionals. Take a builder along with you when you view. What might seem like a simple crack in the wall could be subsidence. That musty smell could be a serious damp problem. Don't necessarily write these kind of properties off - you're likely to get them cheaply - just know as much as you can, what you are letting yourself in for (and always budget in extra money for the unforeseen!).
As well as working out a firm budget for doing up your property, you also want to get a firm completion date from your builder. All the time the property is unrented is costing you. Whatever your builder says, add a few weeks (for the unforeseen). Am I sounding like a merchant of doom? Perhaps, but it's better walking away from a property that potentially won't work, than gambling it will. Remember, you are not gambling, you are investing - so play by the numbers.
By the time you've built up a portfolio of a few small properties, you should have developed enough confidence to go for larger ones (if that is your plan of course - you can stick to small units). Commercial properties have advantages over residential properties, with longer tenancies and the maintenance costs generally covered by the tenant. The downside is getting a tenant, not as easy as with the residential market.
Whatever you next move, stick to the numbers and you won't go too far wrong.
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