Seven big investing mistakes everyone can avoid
There are plenty of things that can go wrong – the good news is that with a bit of planning and common sense you can avoid a lot of them.
Start with these seven top investor mistakes and how to avoid them:
Mistake #1: Not having a back-up plan
Owning an investment property is great while the tenants are paying their rent and nothing is going wrong. But if you’re relying on rent to pay your mortgage and don’t have an emergency fund, events like a long vacancy or costly repair could cripple you financially. To protect yourself, put aside at least three months’ worth of repayments.
Mistake #2: Scrimping on insurance
Taking out an appropriate level of building and landlord insurance is critical. Whether your tenants are terrible or your best friends, accidents can happen, so make sure you are covered for when they do.
Mistake #3: Failing to research
There is no excuse for failing to research properly – good local real estate agents and online resources will guide you through median rents, vacancy rates and suburb demographics.
Mistake #4: Not putting yourself in the tenant’s shoes
Speak to local property managers about what is popular with renters in the area, and the value-adds that are important to them, such as a dishwasher or airconditioning. Falling in love is a recipe for bad decision-making. Choose a property with a good rental yield and solid growth potential, and then remember to always treat it like a business asset.
Mistake #6: Trying to do it all yourself
A good property manager can be worth their weight in gold. They’ll handle everything from advertising, vetting tenants and organising paperwork, to collecting the rent and performing routine inspections. They are experts in dealing with tricky tenants and their local market knowledge can be invaluable. Banish ideas of overnight success from your mind – whether it’s through longterm capital growth, positive cash flow or buying properties to flip and sell for a profit, timing and good management are essential and overnight riches are highly unlikely.