One of the great things about property investing is that prices will always keep on moving higher. While there might be periods where values dip, in time they will recover and move upwards.
However, if you want your property portfolio to perform better than average, one of the most important things you can do is to not make mistakes when you purchase a property. Buying the wrong asset may not see you lose money, but the opportunity cost of having a property that doesn’t perform over a five or ten-year period will end up being something that does slow you down considerably.
Here are three things to avoid when you start your property investing journey.
Buying ‘investment’ properties
One of the biggest mistakes buyers can make is to buy an ‘investment’ property. What I mean by this is buying a property that is being marketed to investors for any number of reasons.
Typically, investment properties might be things like off-the-plan apartments, which might come with some modest tax benefits, but are unlikely to ever see much by way of growth.
The best thing you can do as an investor is to go out and buy a property as if you were buying your own family home. Generally, all the factors that make a property a great investment are the same factors that appeal to owner-occupiers.
An owner-occupier wants a home in a good location, that is close to high-paying jobs, with plenty of amenities nearby along with great schools and great lifestyle features. In the end, it is owner-occupiers who ultimately drive up the prices of homes and when you buy, you want to be buying with them in mind.
Chasing yield over growth
With higher interest rates it can be tempting to start looking for yield, but that’s not always going to serve you well in the long run. Sure a higher yield might boost your serviceability or make it easier to hold onto your property, but in the long run, you need to ask yourself whether chasing yield alone will get you to where you want to go.
Properties with higher yields in regional areas might have been in fashion over the past few years, but over the long run, it’s worth looking at how these areas have performed.
The trick to not buying the wrong property is to look at how a suburb or location has performed for many decades. If it has produced strong capital growth through all that time, then it might be a good investment location. If it has had long periods where prices did not rise, then you have to assume that will likely happen again in the future.
High-yield locations have higher yields because they have a higher risk compared to your more blue-chip areas. I prefer inner city blue chip locations as they have proven that they continue to grow in value over time and there is always going to be a steady stream of buyers when the time comes to sell who can afford to pay higher prices.
Listening to other people
Arguably the biggest mistake you can make in property is listening to people around you who have not achieved what you want to achieve in property.
When you tell someone you are looking to buy an investment property, you’re no doubt going to be hit with a multitude of reasons why this is the wrong time to buy, or why it’s not going to work out for any number of other reasons.
You are far better off listening to people who are more advanced in their property investing journey and have walked the walk. These types of people know that while property investing is not always smooth sailing and there will be challenges, you can achieve your goals if you come in with the right mindset and are prepared to push forward.
Don’t let other people derail your property investment dreams before you even get started.
If you are interested in the above, feel free to reach out to a Henderson buyers agent today for more information.