Investing in real estate can be among the most rewarding and safe investments. It can be an excellent way to create wealth.
Like any investment, doing your “homework” before you take the plunge could save you from an expensive mistake. More importantly, don’t expect to become an expert overnight.
Some of the pitfalls can be:
- Skimping on research
- Check out the market. Investing in property should be viewed as a long-term investment if you wish to avoid tax implications like Bright-line.
- Check out the Healthy Home requirements for the area, does the property meet the requirements or will there be a further financial outlay involved.
- Research the area you wish to buy in. Is it a desirable area for tenants, are there any land issues, what is the crime rate like?
- Make sure you have a thorough inspection done on each property’s condition.
2. Failing to make goals
- Create a list of your goals, what do you want to achieve.
- What type of properties do you want to have in your portfolio?
- Where would you like the properties to be? E.G., tenanted, Air B & B’s, holiday destination ….
- Would you rent the property?
- Who is your ideal tenant?
- Do you want newer properties or fixer-upper properties?
3. Buying the wrong property
- When buying an investment property, think with your head not your heart.
- Avoid anxious buying, this can be the quickest way to end up overspending.
- Think like a tenant. If you want your tenants to be families, check out properties in good school zones, safe neighbourhoods, and multiple bedrooms. If you are looking for a professional couple, then maybe an apartment or smaller properties.
- Always keep an eye out for cracks in walls, damp basements, pest damage, these could cause you a whole lot of trouble and cost a whole lot of money.
- Invest based on your goals. Stick with your investment strategy. Don’t be persuaded to purchase a property that doesn’t fit in with your plan.
4. Don’t underestimate expenses
- There are always maintenance costs.
- There will always be tax to pay.
- Don’t forget about insurance for the property.
- Before you make an offer, make a list of monthly expenses to determine the property’s return on investment. Is it the right investment?
5. Doing everything on your own
- Do you want to engage the services of a property manager?
- Is there a network of professionals that you can “tap into” for support when purchasing or managing your investment properties?
- Do you need to engage the services of an Accountant?
- We recommend that you seek advice from an investment property advisor before purchasing.
For further information please feel free to contact one of our team here at Kannangara Thomson.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose. We do not give financial, taxation or investment advice and nothing in this article is intended as such. If you require a referral to an investment property advisor, we can connect you with an appropriate professional.