Property investment: what not to do

When purchasing property to generate wealth, you must always ensure that you plan carefully.

Most people are taught early on to learn from mistakes. But losing thousands of dollars due to a bad judgment on an investment property doesn’t pay.

With investment property the stakes are high and the possibility of losing a lot of money is huge. You can go bankrupt simply by taking out the wrong investment loan or purchasing a property in an area that is about to fall into decline.

25 per cent of property investors sell their investment property within just a year of purchasing it, a recipe for a personal financial crash.

So before you jump into property investment, here are a few of the common mistakes.

Thinking in the short-term

A property is like any other investment. You must set goals, consider time frames and strategies and what you can afford to spend. To achieve stable capital growth, it is best to hold on to your property for at least 7 to 10 years.

A lot of houses and dwelling units can double in value during that time, but of course prices won’t increase evenly from one year to the next. Using a buy-and-hold strategy will protect you from these market vagaries and maximize profit.

Choosing to “pick and flick” investment properties, i.e. hold on to them for the short term, will make it very difficult to accumulate wealth and losing a lot of money is a high risk.

Buying on emotion

An investment property is very different from a home. A common error is to pick your investment property because you “like it”, instead of on the basis of capital growth and rental income. You should always think about the features that will increase rental return, and not what you personally may prefer.

Wrong finance

Pre loan approvals are essential. Successful investors never buy a property on impulse, so it is advisable to take the time to study how different loans work and how you should structure repayments.

If you are looking to invest in property, contact SuperRate and one of our consultants will be happy to advise you.