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5 Investing mistakes that can deplete your wealth

Property can be a thrilling venture to take part in.

But for those who aren’t familiar with the concepts and strategies involved, it can also be full of potential traps that could cause you to lose more than you gain.

To better prepare you for to potential pitfalls at play, here are some of the problems commonly faced by the novice investor – along with some compelling reasons to avoid them:

1. Getting too attached to a property

Often, first-time investors get carried away in the excitement of becoming landlords, prompting them to purchase property based on what’s in their hearts, rather than what’s in their head. mistake

While this isn’t always a bad thing, it can and does lead inexperienced investors to make poor decisions.

For example, I have seen too many people buy brand new apartments just because they looked beautiful and shiny and new.

Sure, they look good – but good looks don’t necessarily mean good investments.

The fact that it has an infinity pool and a communal gym might be great for your tenant, but as the owner, you need to consider the fact that you have to pay towards those luxuries through maintenance, repairs and running costs.

Established properties tend to make better investments than the “better looking” new ones.

You can read why here: New or Established: Which makes a better investment

2. Suffering from FOMO (fear of missing out)

When the market is running hot, many inexperienced people will buy anything within their reach because they’re worried they’ll miss the boat.

But if you have a short-term goal driving your decision-making, it could prompt you to buy when the market is already booming – which isn’t the best strategy.

Instead of worrying about missing out on any property, worry about choosing the right one for you, based on your current situation.

Consider your finances, your commitment levels and your preferences, and base your decision around what’s right, rather than what’s right now.

3. Coping with analysis paralysis

This is the opposite of FOMO, but it’s just as common!   

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I have met many people who have been interested in investing for many years – sometimes even decades – but they have never bought a property.

Why?

Because they spend too much time analysing the statistics, the market and the property cycles, and they get so caught up in the numbers they hold themselves back from actually taking action.

This can lead to a paralysis that convinces potential buyers that it’s either the wrong time to buy, or the right property is impossible to find.

But here’s the truth of the matter: you don’t need to be a genius to invest in property.

Either do your due diligence and conduct your own extensive research, or hire an experienced buyer’s agent to provide that service for you.

Either way, the solution to analysis paralysis is to commit to taking action.

4. Falling prey to false bargaining

If you bought a property for $500,000 when the asking price was $550,000, would you consider this a bargain?

The answer: it’s not! auction buy property bid sell house sale

Well, not always.

Often, people think that if you can buy a property below the asking price, it is a good buy.

This couldn’t be further from the truth.

If you bought a property for $500,000 when they were asking $550,000, but it was really only worth $480,000, then it is not a good buy.

Buying a property with great upside or renovation potential for $450,000 when the vendors were asking $450,000 is a much better purchase.

Keep in mind that just because you can barter the price down, it doesn’t mean you will end up with a bargain.

5. Swimming with sharks

There is a huge amount of money to be made in property advising, which is why it attracts its fair share of shady characters.

The property industry is filled with rogues who are hoping to take you for a ride, and pocket your money along the way.

Plenty of bogus organisations run sessions they label “property education” seminars, but don’t be fooled.

They are just hard-sell presentations.8590259 L

Before you even consider buying property, you should invest in your own education first, or at the very least, educate yourself about who you are working with.

This will help you avoid the sharks that swim in the property market, and help you get the best bang for your (hard-earned) buck along the way.

Investing in property doesn’t need to be risky business.

By sticking to a few simple rules, you can avoid all the pitfalls that many others fall into, and create a healthy real estate portfolio that will serve you well now and in retirement.



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About

Kate Forbes is a National Director Property Strategy at Metropole. She has 15 years of investment experience in financial markets in two continents, is qualified in multiple disciplines and is also a chartered financial analyst (CFA).
Visit www.MelbourneBuyersAgent.com.au


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