Real estate investment is a phenomenon all throughout the world. The goal of investing in real estate is to ultimately earn a profit, either through rental income or the sale of a property that has appreciated in value. Some have gotten rich; others have failed miserably.
The property market is complex and often fluctuating. Its ever-changing nature can make it difficult to jump into real estate investment with no experience or understanding of the market. Property valuers in Perth can be hugely helpful when it comes to real estate investment.
Diving into real estate investment blind is a bad idea and will likely lead to plenty of mistakes that can have dire long-term consequences.
What are some mistakes that investors tend to make?
Lack of research
Research is a critical aspect of any venture towards profit. Purchasing a property without doing the requisite research is ill-advised and irresponsible. Always make sure you have physically inspected the property, considered the key factors regarding the value, and perhaps even hired the services of a professional valuation firm to gain important insights.
Purchasing a property based on an emotional attachment is unlikely to work out positively. As the purpose of buying the property is for investment, the emotional attachment holds no significance whatsoever. Your only goal when purchasing the property should be to maximise returns and earn profit.
Not accounting for costs and expenses
Investors can sometimes fail to consider every relevant cost and expense associated with the subject property. When planning your budget, keep in mind taxes, insurance, maintenance, repairs, vacancies, property management fees, etc. Not being prepared for unexpected expenses can derail the process and make earning a profit a lot more difficult.
Leveraging too aggressively
Even though leverage can increase returns, an overwhelming amount of debt is extremely risky. The rental income should always comfortably cover mortgage payments to guarantee no issues down the line.
Failure to consider potential tenants
Remember, your personal wants and needs are not exactly relevant when it comes to investment property. More importantly, you need to think about what attracts tenants, what boosts value, and what can help you maximise your profits on the property.
Lack of regular maintenance and repair
Letting your property break down and deteriorate over time is a guaranteed method of reducing its market value and making it a less appealing option for potential buyers or tenants. The longer you let your property fall apart, the higher the cost of the eventual repair is going to be. Always stay on top of landscaping, pest control, faulty electrical work, damaged pipes, and appliance/system servicing.
Not keeping detailed property records
If you own multiple properties, portfolio management is key. This means keeping detailed real estate records of every property you own. Title deeds, measurements and blueprints, legal and taxation documents, notes on changes in market value, and any other relevant information must be kept.
Failure to insure
Always insure your properties with sufficient coverage. The unpredictable nature of life can leave you in a financially vulnerable position if insurance does not protect you from loss or damage to your owned properties.
Trying to do everything alone
Despite what you may think, real estate investment is not a solo activity. Investors need professional assistance for many of the different steps involved in effective investment, such as finding deals, negotiating contracts, inspecting properties, doing renovations, managing tenants, or handling legal matters. Property valuation services are one of the most popular tools among successful property investors.
What makes a property a valuable investment?
Finding the right property to invest in requires patience, research, and professional assistance. The real estate market is a vast landscape and taking your time to make the right decision is key.
When choosing a property to invest in, consider the following factors:
When investing in a property, you’re investing in the area. Choosing a property in a desirable location is therefore key.
A desirable location is one with a good reputation, low crime rates, little noise pollution, attractive landscaping and greenery, and is near key amenities such as public transport, schools, and hospitals. Areas that have the potential for further development and infrastructure projects may become more desirable over time.
Size and space
The size and space of the property is also an important contributing factor towards value. A property with sufficient floor and storage space will fetch a higher value than one that feels cramped and badly designed. The number of rooms, size of the living space, outside areas, and the internal layout of the house are all important considerations.
Condition and quality
Of course, the physical condition and quality of the building itself are vital. A building that is showing signs of deterioration or has seen a severe lack of maintenance over the years should be avoided, as you will need to spend a significant amount of money to make the property desirable once again.
Financing and affordability
Don’t overspend and ignore your budget. Investing in something you cannot afford is dangerous and may have financially devastating consequences. You also must consider your target market and if your property is affordable in general.
Properties that are affordable and within the budget of the potential tenants tend to have increased demand and appreciation than real estate that is overpriced or unattainable.
Investors who have a clear understanding of the property’s market value before purchasing are much more likely to be successful than those relying on estimations and guesswork. Independent property valuations serve as the most reliable method of finding market value in Perth.
A valuation is a report prepared by a Certified Practising Valuer (CPV). The report serves as conclusive and legally-accepted proof of market value.
All in all, taking the plunge into property investment can be a rewarding undertaking, but it takes a well-informed and strategic conviction. The essential tips outlined above can help you navigate the real estate world and become a prosperous property investor.
Investing in real estate requires patience, research and commitment. Reviewing the common mistakes that property investors make can help you minimise the risks and maximise the potential for significant returns.
Some key mistakes often made include a lack of research and strategic planning, failure to consider potential tenants, overspending and mismanagement of a budget, a lack of regular maintenance, not keeping records and trying to do everything alone.
A valuable property investment is a spacious one located in a desirable area. Professional valuations can help investors determine the market value of a property they’re considering. A key tool for investors, valuations help make informed decisions.
To learn more about property valuations and how they can assist in the real estate investment journey, give us a call today and speak to one of our highly qualified experts.