19 Real Estate Investing Mistakes to Avoid


Mistakes are part and parcel of life and I see them as opportunities to learn valuable lessons.

However, when it comes to property investing, mistakes can prove to be very costly.


So much so that they can often prevent investors from getting past owning one single property.

I must admit it…in my early days of investing, I certainly made more than my fair share of mistakes.

These days, of course, I know better, which is why I wanted to share these common mistakes to help you avoid unnecessary blunders and paying hefty “learning fees” to the market.

1. Buying a dud

This mistake is common amongst novice investors who don’t understand the type of dwelling or the locations that have a history of outperforming the averages.

Instead, they buy an inferior property in a second-rate location that will always struggle to grow in value.

The fact is: that less than 5% of the properties currently on the market are what I’d call “investment grade.”

Of course, any property can become an investment – just kick out the old owner and put in a tenant, but that doesn’t make it the type of property that will outperform the averages.

2. Following “free” advice

While advice from our family and friends is always well-meaning, unless they are property investment experts, their opinion should never be adopted as an investment strategy.


Remember, there are around 25 million property experts in Australia and on the whole, their free advice can become very costly indeed.

3. Not knowing your borrowing capacity

Mortgage brokers have information about a huge number of loans – far more than any investor could research themselves.

And in the current tighter lending environment, working with a specialised property investment broker, you can save yourself a lot of stress and secure a better deal as well.

4. Near-sighted investing

A frustratingly common mistake for newbie investors is to buy where they know, which is usually the suburb they are living in or where they grew up.

Of course, these locations are not necessarily the best for future capital growth.

You see…knowing the local area is very, very different from understanding the fundamentals of the local property market and what makes a good investment.

5. Ownership oversight

When buying property, it’s important that its ownership structure is working hard for you as well.

Yet many investors don’t go to the trouble of getting strategic ownership structuring advice.

There are many possible ownership structures- in a single name, in joint names, tenants in common, joint tenancy, in company ownership or in a  trust or SMSF.

And there’s no one “best” structure – it depends on your own circumstances and the stage of your investment journey.

6. DIY approach

Unfortunately, because everyone has lived in a property, some people think that investing is easy.

Instead of working with experts, they try to do it themselves and often end up with a below-par property that costs them money to hold and takes years to increase in value – if at all.

In my mind professional advice is not an expense – it’s an investment.

If you’re the smartest person in your team you’re in trouble!

7. Not sure what type of debt is best

Some of the well-meaning advice that young people continue to get from their parents or grandparents is about the “importance” of paying off their home loan because it’s not tax-deductible debt.


However, that’s not usually the most efficient use of your cash, nor is paying principal and interest back to the bank on your investment property loan.

This will just create a cash flow hole in your finances, plus the principal part of the repayment is not tax-deductible.

8. Overspending

A simple mistake for novice investors is paying too much for their property, especially when buying at an auction.



Source link

Call Us Now