Whenever you start something new, you go on a learning curve and property investment is no exception to this rule. While everyone is an individual and will have to learn their own way, there are three common property mistakes you should be aware of and be sure to avoid.
Being led by your heart, not your head
This is probably the single most common property investment mistake there is and can lead to all kinds of issues. Investment involves judgement, not emotion. Successful investors take hard facts and examine them in the light of their own knowledge and experience to come to reasoned conclusions, which are right more often than they are wrong. Successful investors do not just “go with their gut”. This may work on the odd occasion but it is definitely not a strategy for long-term success, whatever TV and film might like people to believe.
Failing to undertake thorough research
This mistake can often come about as a result of letting emotions take over. When you’re buying a property as a home, it’s fine to fall in love with it and to be prepared to spend more to buy/repair/maintain it than the raw figures would suggest was justified. When buying buy-to-let investment property, however, this is a horrendous mistake, which can prove very expensive. Those intending to go bargain hunting at auctions will need to be particularly careful about this issue since auctions have two traps for the unwary.
The first is that as soon as the hammer goes down, that property is yours, for better or for worse, which means that you need to be 100% sure it is a good buy before you even take your seat and you need to be 100% clear about the maximum price you are prepared to pay for it. The reason for this is that hazard two is getting carried away by “auction fever” and letting your competitive instinct overrule your mathematical reasoning with the result that you wind up in a bidding war for a property and end up (massively) overpaying for it.
Treating investment property as a “get and forget” investment
You might be tempted to think that as long as you get a good lettings agent and a good accountant on board, you can forget about the investment and move on. This is definitely not the case. In simple terms, not only does an investment have to perform well in its own right but it also has to perform well as compared to your other options and also, crucially, fit into your overall financial and, indeed, life strategy.
In this context, it’s worth noting that although the term “property investment” is often read as a synonym for “buy to let”, this does not have to be the case, for example you could also invest in commercial property (as a landlord) or in property-related bonds and/or equities. You therefore not only have to weight up property investment versus other kinds of investment but also weigh up different forms of property investment against each other (and other investments).