The world of property investment can have many twists and turns.
But one way that you can smooth your journey is to start out with realistic expectations.
In my many years of experience I’ve seen a lot and come across more than my fair share of investors who are starting out with big golden dollar signs in front of their eyes.
Perhaps they’ve listened to bad advice or are just hopelessly optimistic about their property investment prowess.
You see, their expectations haven’t been based on realistic goals or genuine information.
They may also have neglected to identify the growth drivers (or lack thereof) in their particular location and property category.
So to help you start your property investment journey on the right (realistic) track, here are three of the top unrealistic investor expectations that you should avoid at all costs.
1. Believing that the selling agent is on their side
Many real estate agents have told buyers that the property they’re selling is a good investment.
The thing is selling agents are generally good at selling, but don’t often know much about investment-grade properties.
Occasionally a real estate agent will have some investment knowledge and experience, but it’s rarer than you might think.
So, the next time an agent suggests a particular property is a good investment, ask them a bit about their background and their own experience as an investor.
You should also explore what other qualifications they may have in relation to asset selection, lending, loan structuring, asset performance analysis and cash flow calculation.
If their experience in these investment fundamentals is minimal or non-existent, their “advice” is probably just their biased opinion and best ignored.
2. Thinking that “free” advice is unbiased
There are some very polished presenters or spruikers out there who can whiz through numbers on a whiteboard and demonstrate to the unsuspecting buyer that off-the-plan or new apartments are a perfect fit for the buyer’s strategy. tnet
And worse still, they suggest these properties are a strong performing asset at a fair price, when in fact it’s a disaster waiting to happen.
To protect yourself from dubious advice the questions every buyer should ask include:
- How does this fit my strategy? (i.e. What have you gleaned already about my strategy which makes this advice tailored?)
- What are the finalised outgoings? (Many off-the-plan properties are yet to have owners corporation fees calculated and many marketers underquote the real fees)
- What tax rate are you assuming when you tell me that the property will pay for itself?
- Can you provide me with other comparable sales (in this block and in other blocks) to demonstrate that this asking price is fair?
- Can you also provide me with an independent rental appraisal?
- How are you getting paid? (This last one is vitally important. If they’re being paid by the developer of that project, well, their advice is far from unbiased isn’t it?)
3. Giving up on a property too soon
Your property journey will likely have many ups and many downs.
These could be due to the market at the time or perhaps your own financial situation.
The main goal, however, is to stay the course over the long-term and eventually those bumps in the roads will turn into capital growth and the wondrous power of compounding.
The fact of the matter is that sometimes a hefty bill will arise out of the blue.
Sometimes a tenant may break a lease and sometimes a property may take a little while to lease in a difficult part of the market cycle.
Bad things do happen and no property is perfect all of the time.
But take in heart in your sound property selection, which features growth drivers, a good local property manager, and the right insurances in place – that way every investor can usually ride the storm to enjoy the sunshine.
Remember that property is a long-term game and performance up close on a chart will always show static spikes and troughs.
To declare a property a dud after a cash flow downturn is thinking short-term.
Successful investors always keep an eye on the horizon and start out with a realistic mindset – that way they can separate the wheat from the property chaff and maximise their profits along the way, too.
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