Top Property Investment Mistakes You’ll Want to Avoid

There are a lot of growing suburbs in Australia. If I want to invest in any property, all I have to do is look for a good place.

This is a pretty easy task, but I have made many mistakes in the past. Here are a few property investment mistakes that you should avoid (or at least try to):

Lack of a comprehensive Investment Plan

The journey of investing in property is exciting. It is easy to start if you have enough funds. But, going into it without a plan is not a good idea.

It is like sailing a ship without a map. And I prefer to have a map, always.

If I am thinking of investing in a property, I would want to have a detailed plan. I don't focus on immediate returns, I instead focus on the journey.

I need to have a long-term strategy for it, and the steps required to achieve my goals.

My plan would include my financial goals. For instance, If I want to use the property as a passive income, achieve capital growth, or even think of it as my retirement plan.

Then I will have an investment timeline. I will determine the duration I need to hold the property for and plan an exit strategy.

To make this easier, I rely on platforms like The Property Accountant, which provides insights into my financial goals, tracks my property investments, and helps me make informed decisions aligned with my overall strategy. It ensures I stay financially organized and well-prepared throughout my investment journey.

Not doing enough research

I try to be completely sure of everything. But this is not the case with everyone. Many fellow investors of mine lack research.

Let me tell you, not doing enough research will hurt a lot. And yes, do not rely on the advice of family and friends alone.

I always analyze the local market trends. I try to understand the dynamics of the area, like understanding the yields on the properties.

I will then understand how much maintenance the property requires. Also, legal fees rack up pretty fast, so I ensure that too.

Making Decisions Emotionally

This mistake is true for every kind of investment. And when it comes to properties, everyone tends to become more emotional.

I always approach these investments logically. If it doesn't make sense to me, I don't invest. I treat it as a business decision more than anything.

To see this objectively. I set clear criteria. Instead of personal preference, I rather go for what makes sense to me based on the numbers.

And I always seek professional advice. I consult with independent property advisers. I basically try to get unbiased opinions.

Not knowing if you're financially prepared

I might think that I am well off financially. I may also be wrong. And so, I wouldn't want to invest in property if I didn't know my financial condition.

Check the waters before diving in.

I always try to budget everything. I calculate everything from stamp duty to legal fees and maintenance in advance. If everything is good, I dive right in.

Then I try to find the best mortgage option, if it suits my financial situation, then it's good to go.

Ignoring Market Cycles and Timing

I can never be bigger than the market. But people sometimes ignore it, and they regret it.

I always check the market cycles. I see the inflation, and employment rates, and their impact on the property.

I also analyze historical data and identify patterns. Also, there are always new government policies coming out, so I keep an eye out for them as well.

Believe me or not, the market has the power to either make you or break you. Going with the market ensures that your investment is secured.

Time everything with the market to see great results (and be safe).

Putting Your Eggs in One Basket

I never put all my investments in one geographic area.

Being technical, if I invest in the same area, then I will be exposed to all the local risks.

Diversifying your investment is always a good option. Never put your eggs in the same basket, as they say.

Explore opportunities in other states. There are different tax structures in each state, and some of them are real money-saving options.

I always balance my portfolio with commercial, and residential properties. Helps me hedge my investments.

Underestimating Ongoing Property Management

Maintenance is one of the biggest and most consistent costs involved with properties. Most people make the mistake of underestimating these costs.

I ensure proper property management. I check in with my tenants and never neglect any problems.

The best thing is to hire experienced property managers who can handle day-to-day property issues.

I also do periodic inspections to address any issues. In this way, I ensure that maintenance is going on properly.

Overlooking Tax Implications

I realised very late that I was paying more taxes than I should have. And no one stopped me.

Always try to maximize results. This can be done by understanding property taxes. People often miss the opportunities to claim the deductions.

I always try to claim my depreciation and my maintenance costs. This brings down my taxes.

You can claim deductions on almost everything(even on blinds and carpets).

Any negatively geared property can reduce your taxes. And you can always look at CGT and figure out some way to save on it, whenever you sell your property. Keep looking for that 6-year rule.

But I make sure that I do not completely rely on negative gearing. It is important to have capital growth to cover for the losses incurred over years.

It is important to embrace technology innovations like thepropertyaccountant.com.au to keep track of your expenses, costs and finances rather than purely rely on excel workbooks

Neglecting Exit Strategies

People always overlook the exit strategy. Practically, if I don't plan on exiting properly, I might get into trouble. And I might pay more than needed.

As said, I always look at market conditions. I make sure that markets are in my favor.

For example, if I have a money-losing year, I will sell it in that year to save on taxes.

TIP: it is always considered good to hold a property for a considerate time. And then selling it when the water feels right.

I will consult a professional to plan my exit strategy. This is the time I get to reap what I have sown, so it's very important to me. Problems will arise again and again when you start investing.

Problems will arise again and again when you start investing.

I made a lot of mistakes. Now I make sure that others are aware of the property investment mistakes. There are a lot of factors involved when buying a property.

I know that buying a property for personal reasons and buying it as an investment is different.

This is why I approach everything carefully.

I always try to surround myself with other fellow investors. And I talk with professionals whenever I get the chance. It keeps me updated.

I try to stay informed. And I always try to make data-driven decisions rather than emotional decisions.

What are the mistakes that you have made while investing in property?