5 property investment mistakes that you should avoid

Last updated on November 25th, 2021 at 11:04 am by Bill Tsouvalas

If 2018 is the year that you plan to build a strong property investment portfolio there are a few mistakes that others have made that you don’t have to repeat. It is all about starting small when it comes to feeding your appetite for property, but rushing to make it can cause you to crash before you even started. There are many rookie mistakes people make, but here are five that you can avoid before it is too late.

1. Avoid using multiple properties to secure one loan

Using multiple properties to secure one loan is also know as cross-collaterisation. This can be an investment mistake that you want to avoid because it could end up costing you more. This means that should something bad happen to your investments the bank can force you to sell off multiple properties to make up for the one loan you took out. It can also mess with your cash flow and limit your ability to reinvest again. One way that you can avoid cross-collaterisation is by getting different loans for each of your investments.

2. Having your fingers stuck in too many pies

The skill in investing in property takes time and money. If you have you rush having a number of property investments under your belt you could end up losing more money than making it. A sound financial investment comes when you invest in one property and find a way to make it generate money on its own. This comes with having a good investment strategy and allowing it to develop your first property until it is stable before moving on to the next one. It will also help you not to spread yourself and your resources too thin.

3. Keep a good track of your finances

As the adage goes ‘It takes money to make money’ keeping track of it will be essential for your portfolio to thrive. You need to keep records of every cent that comes in and goes out to finance and maintain your buildings. You can also speak to real estate agents to know what can help you increase your rental income without breaking the bank. Everything associated with running your property is an investment in itself and will determine whether you make it or break it.

4. Have your investments spread out

If your next step is to increase your property investment portfolio you have probably taken the steps to research various property markets to ensure that you are making a sound investment. However, be careful not to throw all your money into investing in one area that has seen its property value increase over the years.

These are areas also known as hotspots. Investing in property that has shown good rental yields over the years is good, but investing in various suburbs that have a history of growing property values and rental yields is better. By keeping your investments spread out in various areas you won’t have to worry about losing all your investment should one area where you have invested in experiences a slump.

5. Underestimating the costs of maintaining your investments

If you rush the process or underestimate the time it takes to turn your property into a space that can be occupied by people, then you are most likely going to underestimate your costs. Before you even set to get the work done you need to get quotes and compare them to find the best deal that is affordable. Instead of budgeting for the exact amount, it is advisable that you double your figures to make sure that you can cover any shortfalls.

Running an investment property takes time and money. The only way that you can ensure that you have a strong portfolio is by enlisting the help of professionals to help you build a solid foundation that won’t shatter in years to come.

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