Why most investors never get past their first investment property

There’s nothing like the thrill of buying your very first investment property.

For many, this is when the property buy ‘bites’ – and they become obsessed with the idea of adding to their portfolio.

Investor Problem Stop BridgeYet, for myriad reasons… that never happens.

Often, it’s because the investor discovers they’re suffering from First Investor’s Burn Out.

This is a common affliction for beginner landlords, particularly if their first investment didn’t pan out quite how they were hoping.

If your first foray into real estate is less of a money-maker and more of a money pit, then it stands to reason that you might be cautious about diving into property number two.

However, those investors who do build a strong portfolio of quality property assets, are the ones who stand to build long-term, lasting wealth.

Don’t let First Investor’s Burn Out affect you, too.

Instead, consider the following five key reasons why most investors never get past their first investment property – so you can strategise a way to forward with your own real estate goals.

1. Their first property is a dud

There is so much due diligence and research to do around buying any property, but even after you’ve done all this, you could still end up with a dud.

How?

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Maybe you did plenty of research into capital growth stats and supply and demand, but you neglected to investigate vacancy rates, and now you’re struggling to rent the property out.

Perhaps there’s been a shift in the market and now the rental income is significantly less than you’d hoped for.

Or, it could be the case that a property spruiker led you down the garden path, convincing you to a buy a dud piece of real estate that has failed to stack up in any way, shape or form compared to what was promised…

Whatever the reason behind, you can win up buying a dud property.

If it happens to you, don’t feel bad, and don’t let it scare you off investing further.

While suffering a loss instead of a profit can feel like a kick in the guts and knock your confidence, it’s a mis-step that many, many investors have made before you.

Don’t let it define your journey; just make sure you learn from your mistakes and get back out there to try again.

2. They fail to plan properly

Even if you’ve invested in a great property, without a solid strategy, you could find yourself sitting with a solo-property portfolio for the rest of your investing journey.

PlanProper planning means you’re able to find the right place, in the right location, with the potential to build enough capital to springboard your way into property number two.

If you’re feeling lost when it comes to your plan, take a look at all the key factors that are so important when it comes to property success.

Things like location, of course, along with historical growth, proximity to major cities and infrastructure, rental yields and supply and demand should be at the forefront of your property plan.

Remember, proper planning prevents poor performance, and in the realms of property, it is paramount.

3. They’re too eager

One thing you need to realise about property is that it’s a long-term game.

If you’re looking to make big bucks quickly, investing in property may not be for you.

Unreasoned DecisionWhilst having enthusiasm is great and will take you far, don’t just jump at the first deal you see.

Crunch the numbers, talk to the experts, and do your research before you commit to anything.

Those who don’t move on from their first property have often made this very mistake, and have bought at a price much higher than they should’ve, which is preventing them from accessing equity to buy another property.

Instead of making their next move, they’re still paying off on the first property – and failing to make any progress towards their property goals!

4. They’re not eager enough

On the flip side, first-time investors may buy their first rental, and then plan.. and plan.. and plan for the next one.

But, they forget one highly important step. Execution!

Now Or Later. Woman Thinking Looking Up. Human Face ExpressionNo matter how deeply you plan, or how detailed your figures are, it’s pointless to invest all of that time and energy into the process, without following through with execution.

Don’t fall into the trap of thinking and not doing.

If you’ve succeeded in acquiring your first property and you are well on the way of planning your next, don’t let nerves get the better of you. Collate your plan, run your numbers and get your strategy all lined up.

Then, all you have to do next is take that step.

5. Their serviceability takes a hit

Serviceability is a big – and often misunderstood – aspect of property investing.

Essentially, your serviceability is how much you’re able to borrow from a lender.

Even though you might’ve had swift success with finance for your first property, depending on how it performs, you might struggle with your serviceability on the next one.

ServiceabilityThis then leaves you unable to fund any future property purchases – at least for the time being.

Your serviceability might take a hit if your income drops; if you take on any personal debts (such as a credit card); or you’ve got a negatively geared property that is costing you money to hold.

External factors can have an impact here as well, including interest rate rises and policy and criteria changes on behalf of banks and lenders.

Whilst you can’t do much about the latter, you can make sure you have a plan in place that aims to minimise your own debts into order serviceability, so they don’t damage your chances when you attempt to finance your second property.

No matter what the reason is, some people just can’t seem to make it past that first property.

If you plan, research, execute, and don’t lose your nerve, you should soon find yourself leap-frogging from property to property, building your portfolio and finding success.

However, if you find yourself need a little more guidance and encouragement to make that next step, it might be time to consider engaging a qualified property advisor to help you take that important next step towards building wealth through property investing.

If you’re looking at buying your investment property here’s 3 ways the team at Metropole can help you:

Sure our property markets are improving, but correct property selection is even more important than ever, as only selected sectors of the market are likely to outperform.

Why not get the independent team of property strategists and buyers’ agents at Metropole to help level the playing field for you?

We help our clients grow, protect and pass on their wealth through a range of services including:

  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now! Click here to learn more
  2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property.  Click here to learn how we can help you.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.

 

fact: our markets are on the move

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Michael Yardney

About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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