First Time Property Investor Mistakes That You Should Avoid

August 11, 2023

Entering the world of property investment as a first time investor can be exciting and challenging. As a newcomer, knowing where to start can be quite tricky. 

Amidst the abundance of advice available on approaching property investment, it is equally vital to recognise the significance of knowing what not to do. 

The following article will dive deep into five common mistakes first time home investors should avoid when beginning their property investment journey. 

By understanding these mistakes and learning from the experiences of others, first time investors can set themselves on a path towards a successful and profitable investment journey. 

Mistake #1 Not Conducting Adequate Research

Searching for an investment property can indeed be a tiresome process. The temptation to skip the research and rush into a purchase can be substantial. 

However, it is crucial to understand that this phase is among the most critical steps in property investment. Hence, conducting thorough research is essential to ensure a successful investment that meets your expectations.

Research helps you understand the real estate market in the area where you choose to invest. As an investor, it allows you to analyse trends, property values, rental rates and potential growth areas. By studying the market, investors can make informed decisions and identify properties with good investment potential. 

What does 'Property Research' actually mean?

Assessing location is crucial for first time property investors for many reasons. One primary reason is the property value, as the neighbourhood in which a property is located significantly impacts its value. Locations with positive growth trends, with high rental yield and attracting a high population, are more likely to attract buyers and tenants, resulting in higher property values and rental rates.

In our pursuit of delivering the finest outcomes for our esteemed customers, we exercise the utmost selectivity in choosing properties. Here, we present our top five criteria for identifying high-growth suburbs and locations:

  • Growing population
  • Infrastructure & amenity
  • Close to jobs & transport
  • Affordable
  • Rental demand

Locations undergoing revitalisation, urban development or gentrification may offer future opportunities for property value appreciation. A first time investor should stay informed about the region’s plans and infrastructure projects, as this can create investment decisions that align with the long-term growth potential of an area. 

Assessing location is essential for first time property investors to determine the following:

  • Property value
  • Rental demand
  • Rental rates
  • Target market
  • Long-term potential

A thorough assessment of locations ensures that first time investors make informed decisions and choose properties in areas that align with investment goals.

Mistake #2 Forgetting Hidden Costs

In addition to mortgage repayments, property investors must consider various other financial aspects, such as maintenance costs, repair bills, strata fees, property taxes, and insurance fees. All these expenses can quickly accumulate, and preparation’s essential.

When venturing into property investment, it is wise to set a maximum limit for spending and establish an emergency fund to handle any unforeseen costs or issues that may arise during property management.

Moreover, ensuring your investment is financially sound is crucial. Having sufficient funds for a substantial property deposit and the ability to cover monthly loan repayments is vital. 

First time investors should avoid overextending their finances, which can lead to financial strain, impact cash flow and returns, and hinder long-term financial goals. Creating a well-thought-out financial plan is essential. Staying within a reasonable budget will help ensure a sustainable and prosperous investment journey.

The Ultimate Guide to Triple Net (NNN) Lease Properties

Mistake #3 Investing in an older property 

Purchasing an older property can be risky due to a myriad of potential issues like termites, poor stumps, faulty wiring, and rusty pipes, which might catch you unawares. The constant worry about unforeseen problems and increasing maintenance costs can make it a stressful investment choice for many.

On the other hand, investing in brand-new or off-the-plan properties can pose more benefits:

  1. New properties come with a building warranty, providing you with a safety net during the defect liability period. If any problems occur, you might not have to spend a single penny to rectify them.
  2. Investing in new properties offers great tax benefits. As newer properties usually qualify for higher deductions, you stand to enjoy more significant profits at the end of each financial year.
  3. Newer properties are highly desirable among tenants due to their modern and low-maintenance features. This appeal increases the likelihood of renting them out at a higher price, benefiting both you as the owner and the tenants seeking a comfortable and hassle-free living space. It’s a mutually advantageous scenario for all parties involved.

Mistake #4 Not Having A Proper Property Investment Strategy

Not having a clear plan in place from the beginning can be detrimental. It is essential to avoid rushing into buying a property without a well-defined strategy for generating income or returns. 

The buying frenzy can be appealing in a hot real estate market, but it’s crucial to step back and plan carefully. Consider potential scenarios, including what to do if the market cools down or your assumptions prove incorrect.

Before diving into property investment, take the time to establish your investment strategy rather than getting carried away by the excitement of buying. Ask yourself important questions such as (but not limited to):

  • What kind of property am I seeking?
  • Which location am I targeting?
  • What will be the impact if the market experiences a downturn?

These questions only begin to delve into the depth of your plan. Your strategy should be more detailed than this initial exploration. Nevertheless, these offer a valuable starting point for your planning process.

In real estate investment, having a long-term perspective is crucial. Australia’s historical data demonstrates that the longer you hold onto your investment in the market, the more likely you are to experience higher capital gains.

As a first time investor, avoid opting for short-term gains, which may come with higher risks. Instead, hold a slow and steady approach for a better chance of success in the long run.

Mistake #5: Doing Everything On Your Own

One of the most common mistakes made by property investors is thinking they can handle everything on their own and failing to leverage expert advice. However, it’s essential to understand that seeking expert advice is usually wise.

It’s crucial to keep in mind that the factors considered when purchasing an investment property should differ from those when buying a home. An investment property should primarily function as an investment, generating returns through appreciation in value and/or regular income. To achieve this goal, each property bought for investment requires evaluation using distinct methods, often requiring expertise beyond that of many inexperienced investors.

That’s why many property owners approach experts for assistance in organising their property portfolios.

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Whether buying a home, an investment property, or refinancing your mortgage, the process might seem overwhelming. But with the guidance of a real estate agent, things can become much more straightforward. Additionally, a team of experienced property consultants can provide further support. Their expertise makes the process much smoother and easier to navigate.

Start Your First Time Investment Now!

Embarking on the journey as a first-time property investor can be an incredibly rewarding venture, especially when approached with careful consideration and knowledge.

Starting the investment property journey can feel like a big challenge, especially for first time investors. However, Daniel, one of our clients, has managed to acquire his first investment property and grow his portfolio with the help of St Trinity.

Daniel understands that time is crucial when it comes to building wealth through investments. Starting early gives you more chances for growth and better returns.

“It’s stressful, but it feels great to know that we’re building wealth for the future so early, and it feels secure to own an investment property.”

At St Trinity, our dedicated team provides unwavering support as you embark on your first property investment journey. We understand that the prospect of starting this venture may seem daunting, but we are here to guide you step-by-step throughout the process.

If you have any enquiries or need assistance, do not hesitate to contact our team today at (02) 9099 3412. We look forward to assisting you in making informed and successful investment decisions.

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