1. Not Knowing your investment Objectives

 

A lot of investors head straight into investing within property but they have not analysed what their investment objectives are. We have to ask ourselves are we looking for cash flow today, are we looking for long term capital growth or are we looking for a mixture of both. We need to decide what our business objectives are and thereafter we can look for properties that are aligned with our business objectives.

 

 

2. Waiting for the Perfect Property to Come along

 

We look for a property that would be our perfect investment property, we come across investment opportunities that are really quite good, but we decide not to invest in it because it is not perfect and let it go. We then have to wait a further 6 months to go by to find a property that is even close to the one we dismissed because it was not perfect. Therefore do not always wait for that perfect property deal to come along as we may be waiting for a long while. If we believe it is a good deal and we have done our due diligence on the property and are comfortable the numbers add up then get that deal executed. However the other end of the spectrum is……

 

 

3. Do not become a “Motivated Buyer”

 

Sometimes investors have a lump of money in their accounts and they realise property investing is where they need to be and they then become a “Motivated Buyer” as they look to buy literally anything. This is not the method that should be undertaken, having funds within the account is a great starting point, and it gives us the opportunity to take a lot of action and find a really good opportunity, although not the perfect opportunity as mentioned previously; we should be searching for a good opportunity. We can do this by undertaking thorough research on locations, prices and whether the numbers add up to make it a viable investment opportunity. Therefore we have to strike a balance between not waiting too long but also not being too rash in our decision making.

 

 

4. Letting emotions overrule investment logic

 

We are never going to live in this rental property so what we should be doing is using investment logic to decide whether we should purchase the investment property by reviewing most importantly the numbers. Purchasing a property because it has your most favourite wallpaper as an investor would be allowing your emotions to overrule! However also look at other factors as well such as rental figures around the area, demand etc although always remember to purchase for logical investment reasons rather than emotions.

 

 

5. Doing Insufficient Due Diligence

 

Investors should be undertaking a lot of due diligence at first when we are looking to purchase our first or second property. We should be spending a couple of hours reviewing the property including its surrounding areas, location, rental demands, square footage prior to putting forward an offer and putting our investment on the line. Once we have become experienced at undertaking due diligence we should be able to undertake such due diligence within 15 minutes. It is very important to master the skill of undertaking due diligence as this is our decision making area as to whether the property concerned is a viable investment opportunity. As the years go on we can refine the time we take as we will realise what we need to know in order to affirm our decision.

 

 

6. Not Getting Appropriate Financial Advice

 

Each investor should have a competent tax advisor on its power team. A tax advisor who we are able to phone up and obtain advice on how we should be purchasing a particular property. We should also have a competent independent mortgage broker in whom we are be able to speak with and seek advice from that is appropriate to our set of circumstances. Lastly, but perhaps most importantly you should have an accountant where you can go and sit down with them, spend the money that is required to get appropriate financial advice and then and only then you should be taking action.

 

 

7. Paying Too Much

 

Investors find it ever so easy to search for a property on Rightmove that is already on the market which meets all of your needs and you bid close to or actually on the asking price of the property. However just because they are advertising it for the price outlined on the advertisement, work out what the deal is actually worth for yourself based on your experience. Thereafter you should realise what the maximum you should be paying for that property is reflective of what it is worth for you. If it does not work out for the seller it is okay, put it in a follow up system and if the seller has not sold after 4-6 months you can re-establish communication with the offer you made initially because at that point the seller may be more motivated to sell. Remember do not pay too much for your next deal!

 

 

8. Underestimating Refurbishment Costs

 

Investors generally spend a lot of money on refurbishment on properties. However bare in mind in your initial few properties you are likely to overspend therefore make sure you make a note of exactly what you spent and where on your first three properties. Therefore each time you do your next property you can go over those previous costs and ask yourself actually what did it cost me to put in a new central heating system or electrics? Let me look back at my figures.

 

 

9. Keeping Up To Date with Rent Rises

 

When investors start to build a portfolio and they have properties in their possession for a few years what you will realise is that occasionally tenants keep very quiet as they are aware they are paying less than the market rate. They may just be good tenants, but unfortunately not always! Therefore investors should annually review all their properties to see the Comparables for each property to ascertain what is the market rate of rentals if I were to rent that property out today in order to ascertain whether you are charging less than the market rate.

 

 

10. Investing for the Long Term

 

A number of investors tend to make short term decisions when building their portfolio. Whereas investors should be taking the angle when reviewing properties and asking themselves “Would you actually be keeping the property forever?”. If the answer is yes, then it is a positive decision and you should proceed to purchasing the property provided you undertake your due diligence and understand your Investment Objectives!!!

 

Best of Luck!