As a property investment strategist I have seen, and yes committed, my fair share of property investment faux pas.
But what I find interesting is that people often mistake risks that can be mitigated for, as investment blunders.
When in fact, the blunders are generally the things that happen when you fail to properly mitigate risk, by seeking expert guidance and undertaking extensive due diligence before diving headlong into acquiring property assets for your portfolio.
Let me give you an example by kicking off our ‘Top 3 property investment mistakes’ with number one.
The risk associated with this cardinal real estate sin is incorrect asset selection, leading to poor asset performance and potentially, loss of profit over the long term.
The mistake people make is…
Mistake Number 1 – Failing to understand the science of location, location, location
Instead of mitigating the risk of poor asset selection by undertaking thorough analysis of a suburb’s performance over time and consulting an authority on the area they’re considering (such as a local buyer’s agent), these investors either think they know it all.
Or worse still, purchase in a particular postcode off the back of advice from friends and family.
If the person sharing their wisdom with you is not a successful property investor in their own right, or a professional who works in the industry (and I don’t mean your Uncle Ben, the real estate agent), then they really are in no position to guide your investment acquisition.
It’s funny how much time people will dedicate to buying, say a new car or big screen TV – shopping around for months sometimes.
But when it comes to spending anywhere upwards of $450,000 for a property, they’re quite happy to make what is arguably an impulse decision.
Don’t be a statistic when it comes to risking an under performing asset.
Do your homework and if you’re at all uncertain as to whether a location stacks up as a long-term growth prospect, seek out expert advice on the area before making your move.
Mistake Number 2 – Being ‘stooged’ by a spruiker
Leading on from my above point, is the cautionary tale of investors who take advice from self-professed ‘experts’.
These people often attend “free seminars”, where you can allegedly “learn all about the rules of property investment.”
A loose interpretation of most “free seminar” promises would be – “come along and let us sucker you into buying an off-the-plan/serviced/student apartment with guaranteed rental income.”
Some spruikers are so kind, they’ll even offer to manage your entire portfolio, along with the financing and purchasing process and all rental activities. Such generosity.
Don’t be fooled.
These are not independent advisors, because they’re selling either their own or their boss’s wares and hoping for a tidy commission in the deal.
They cannot possibly give you impartial guidance when they have such bias.
This means the chances of the investment you walk away with actually being suitable to your long-term investment goals and plans are slim to none.
The best way to avoid being a property seminar statistic is to understand who you are as an investor, have a clear vision statement when it comes to your objectives over the long term and based on those objectives, a sound strategy as to how you intend to get there.
Only by doing so will you avoid being distracted and potentially veered off your path into impending investment misfortune.
If you are in the real estate game for long-term wealth creation, your focus needs to be on growing a portfolio of assets that perform above the averages with regard to capital growth.
It’s that simple.
Mistake Number 3 – Doing nothing
I’m not sure which is worse, being fooled into purchasing an inferior and possibly over-priced product, or failing to buy anything at all when you have the means to do so.
Procrastination is the killer of opportunity.
And believe me, every investor has a story about ‘the one that got away’ because they just didn’t act in a timely manner – particularly those who fail to act on some ‘hot stock market tip’.
Stave off the investment insecurity that can threaten to paralyze you into inertia, and avoid all three of these wealth creation killers by:
1. Knowing who you are as an investor, including your risk profile.
2. Consulting independent experts to help with all aspects of your property investment portfolio, including asset selection as well as purchase and finance structuring.
3. Doing your due diligence.
4. Making a start.
The last one is critical.
Life is too short for regrets and lost opportunities, particularly when it comes to securing your financial future and that of your family.
If any niggling doubts are holding you back, it’s time to consult an experienced professional who understands the investment mindset, to get you on track.
Because nothing can undo the mistake of taking time for granted.