Most clients and potential investors do due diligence and purchase real estate with eyes wide open. But sometimes – and more often in this hot market – they will unwittingly waiver in their judgment.
In my experience the biggest and most common mistake investors make is not doing enough RESEARCH.
The right agent will ensure you are privy to all the pitfalls and make certain you don’t blunder before you buy.
Research is more than market trends and building reports. Making sure your investment property ticks all the infrastructure boxes and demographic nuances is crucial to any wealth creation plan in real estate.
Then there’s the common mistake of buying with the HEART and not the head. Emotional purchases can often mean rushing in without adequate consideration. A property might make you feel warm and fuzzy but it also might fail dismally as an investment proposition.
I also see many potential investors influenced by what their friends are doing. Just because your mate or lifelong bestie is buying in a certain area doesn’t mean it’s right for your portfolio strategy. And remember friendships can break down. In 10 years’ time you might not want to have a house next to someone who was your friend back at the start of your property journey.
Stay focussed on your end game and don’t allow logic to fall by the wayside.
Another mistake that I’m seeing more of these days is people buying into an APARTMENT complex because of the “amazing” facilities. Some agents love to “gimmick up” these types of properties but make no mistake, you will pay dearly for these bells and whistles. Communal barbecue areas, gymnasiums, pools and electric charging stations for your Tesla. Sounds swanky but the reality is that they have no land and are part of a multi-residential complex.
Just this month I had another agent’s client come to me for advice. They had bought an apartment in the CBD 10 years ago for $500,000. It came with use of the gym, pool, recreational centre and lifts. The client lived in the apartment for a period then rented it out. But even after a decade the property hadn’t achieved any growth. It now has significant maintenance problems the strata fees remain at $3000 a quarter. This client is now faced with the quandary of whether to refurbish and sell, or refurbish and re-rent. Either way they need to spend about $25,000 on flooring, carpets and wet areas.
I believe they should make the improvements, sell and then invest in a landed property. It’s a good market to pass it on while others are jumping in FOMO-style. If 10 years ago this client had put their money into a property with land, the growth would have been significant.
While on the subject of apartments, beware of buying OFF THE PLAN. There are loads of incentives for this style of investment right now, so seek advice from a knowledgeable agent to do the research so you end up with a reputable developer. Does the builder have the ability to change footprint after you sign? Do you know exactly what you’re getting?
The last investment mistake is one that I’ve seen increase during the pandemic. More and more people are wanting to invest in a LIFESTYLE property. Give this serious thought and discuss all the pros and cons with your agent before you leap.
Think about how people’s attitudes change. Jumping into a sea change at 40 seems utopic, but then they get to 55 and it’s suddenly no longer their place of choice. So they go to sell and realise that it’s an asset that hasn’t grown in value at all after 15 years. Attitudal change is monumental and no one thinks about when they’re barrelling into a lifestyle move with blinkers on.
A good agent will be equipped with all the analytical weapons to help you tackle all aspects of residential and commercial property investment so make sure you use them.