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The hectic conditions of the current property market have many first-time investors feeling the pressure to secure a property before they’re priced out.
But buying a property is a decision that should never be rushed – and jumping in before you’re ready could be costly.
Do you want to avoid the common mistakes homebuyers make?
Well…here’s a list of some of the common things I hear from more experienced buyers about buying their first home or investment property.
To learn from their mistakes, these are some of those little (and big!) things they wish they’d known before taking the plunge…
1. There’s always some kind of trade-off
When you’re buying a property, there are three major factors involved:
- Your budget (usually determined by what the bank is willing to loan you)
- The property itself (age, size of the block, how many bedrooms and bathrooms, etc.)
- The location.
You can’t do much about your budget, other than minimising your debts and reducing your credit card limits.
And you can always renovate or extend the property later. But you’re stuck with the location – so don’t compromise.
2. You need to focus on your finance first
It’s so important to get the right finance, and having a great mortgage broker can really help.
Get your finance pre-approval before you start your property search, so you can confidently make an offer.
And make sure you have a buffer for emergencies, such as the hot water system blowing up the week after you exchange contracts.
Yes, that really happened to one investor I know!
3. It’s essential to factor in unexpected costs
As I just touched on, it’s essential you make sure you have a budget to cover the unavoidable but sometimes unexpected costs of owning a home.
These are the expenses that your landlord or perhaps even your parents may have covered in the past.
You can’t plan for everything, but having a rough idea of your costs and putting some money aside each time you get paid to cover things like utilities, insurance, body corporate fees, property management fees, and maintenance will help take some of the stress away when bills popup.
Remember, these costs don’t stop when your investment property is empty and there’s no rent coming in, so building an emergency account is key.
4. Don’t fall in love with a property
When buying an investment, don’t look for a property that you would love to live in, or where you plan to holiday – look for the type of property affluent owner-occupiers would like to buy, and affluent tenants will be prepared to rent.
It’s easy to get caught up in superficial things and not look deeper, especially when a property is staged for sale to make it look attractive.
Don’t fall in love with a property; fall in love with the numbers.
Think with your head, not your heart, and you’ll be on track for success.
5. Look beyond your backyard
There’s an entire world of rental markets outside your own neighbourhood, so don’t limit yourself.
Location does most of the heavy lifting of your investment property’s capital growth, and in the post-COVID environment, neighbourhood is more important than ever.
This means looking beyond your suburb, your city, or even your state to find a good quality property.
6. Don’t believe everything the selling agent tells you
The agent works for the sellers, not the buyers, so don’t be fooled into thinking they have your best interests at heart.
Get independent advice, do your due diligence and find a good conveyancer to make sure everything is above board.
And never scrimp on building and pest inspections – a few hundred dollars saved now could cost you a fortune down the track in nasty hidden surprises.
7. Build your own dream team
Having a good team around you to support you through the entire process is essential.
Some people fret at the idea of spending money on experts, but the truth is, you will spend money on good advice or you’ll spend it making mistakes that you learn from later.
I can’t tell you how many investors I meet who say “I wish I’d met you before I bought my first investment property – it was a dud and I didn’t make any money.”
The most expensive advice you’ll ever receive is free advice on the internet which is wrong.
So, invest in your dream team, and you will reap the rewards.
8. Follow expert advice, not trends
Don’t look for the next hotspot.
As an investor, you need to focus on the type of property and location that has always worked – not what is working right now, or what do you think will work in the short term.
Don’t make 30-year investment decisions based on the last 30 minutes of news.
Instead, take a long-term perspective. The average investor thinks about the next 2 to 3 years, but the very successful investors have a 20- to 30-year horizon and a plan to get there.
9. Don’t wait for the perfect property
You’ll never find a perfect property.
You’ll almost certainly find problems in every property – even experienced investors do – but if you have an experienced team and do your due diligence, you’ll have most bases covered.
Just as there’s no such thing as a perfect property, there’s also never a perfect time to invest.
My advice is not to try to time the market.
Get your own personal ducks in a row (meaning your finances, your debt, and your savings) and get yourself in a position where you can buy when you’re ready, and on your own terms.
This will set you up for a lifetime of smart property decisions that move your wealth forward, rather than rushed purchases and rash mistakes that set your finances back.