Property Investment For Beginners – 4 Common Mistakes

 Property Investment & Real Estate – Where To Start

Learning how to invest in property like a pro takes time, and if you’re new to the game, it’s easy to make rookie errors.

We see a lot of beginners make mistakes, they often just didn’t know what they needed to ask! That’s why working with a professional Sunshine Coast Mortgage Broker like Nicky Orchard is important – you will avoid mistakes and benefit from her 26 years in the industry!

Here are 4 common mistakes to avoid when buying your first property investment.

Property Investment For Beginners - 4 Common Mistakes | Orchard Mortgage Brokers Sunshine Coast
Property Investment For Beginners – 4 Common Mistakes | Orchard Mortgage Brokers Sunshine Coast

Investment Property Cash Flow

As a first-time property investor, it’s important to have a solid understanding of both the initial purchasing costs you’ll be up for, as well as the ongoing costs of maintaining an investment property.

Examples of ongoing costs may include:

Council rates;
Water bills;
Land taxes;
Body Corporate Fees
Property Management Fees; and
Insurance

You should also factor in extra money for things like repairs and maintenance.

Expect the unexpected!

Before you go ahead and purchase an Investment Property, create a budget and include all of these types of expenses. Better yet, speak to us and we’ll help you create a budget and plan accordingly.

Mistake #1 Poor Cash Flow Management

Have some extra money set aside. Do some research and crunch your numbers to make sure you can handle the ups and downs of owning an investment property. Having a budget and planning for the unexpected is the key!

What is a Rental Guarantee?

A rental guarantee is when a vendor or developer guarantees a certain rental income for a set period. Sounds peachy, right? Not always.

The problem with these is that the price of the rental guarantee is often built into the purchase price. So, in effect you may be paying for the guaranteed rent yourself via an inflated purchase price.

The guaranteed rent may also be at above market rates to make it sound more enticing. However, when the contract is up, you’ll be left with a lower rental return – or maybe no rent at all.

Meanwhile, lenders may use the market rent, rather than the guaranteed rent, when assessing your eligibility for a loan.

Mistake #2 Be aware of an inflated rental guarantee

To avoid falling into a rental guarantee pitfall, it’s important to do your own research thoroughly – don’t just take the vendor’s word for it.

Should I Buy Off The Plan?

Buying off the plan works for some investors, but it can be risky.

Another potential problem with buying off the plan is that you can run into issues with securing finance. Some lenders may offer conditional approval (finance in principle) for off-the-plan purchases before construction starts, but they won’t actually loan you the money until the property has been constructed and they have performed a valuation on the finished product.

At this point, the property may not be valued by the lender at the price you’ve agreed to pay once it is completed. This can make it difficult to secure the finance you need to complete the sale, which may cause you to lose your deposit, or you may have to sell it quickly at a loss.

Your financial position and ability to service the loan could also change drastically between the time you agree to buy, and when you actually purchase the property. There may be market falls and interest rate rises (as we’ve seen recently) that could affect your borrowing ability.

Mistake #3 Know The Risks Before Buying an Investment Property Off the Plan

One of the common problems with buying off the plan is the risk that the developer may not construct the property on time or at all, or they may deliver something sub-standard.

What Do I Need To Know Before I Buy My First Investment Property?

As a first-time investor, understanding all the ins and outs of buying a property can be tricky. From finding the right investment property to suit your investment goals to securing a home loan meets your specific needs, the process can be a bit of a minefield.

That’s where we can help. A mortgage broker will do the hard yards for you, from explaining your borrowing capacity and creating a purchasing budget, to providing practical advice about loan products and structure for your specific investment strategy, financial situation and goals.

To get started on your property investment journey, get in touch. We’re here to help.

Mistake #4 Don’t Buy an investment property without getting professional and personalised advice

If you are thinking about investing in real estate or buying an investment property, it’s a smart idea to get as much information as possible. Get the right advice from professionals and plan!

We love looking after our clients and answering all their questions.

We love helping our customers grow financially.

We will help you research, plan and budget for your first Investment Property. Call our office and make an obligation free appointment with Nicky Orchard | Orchard Mortgage Brokers.

Here is another helpful article by Moneysmart. Property Investment, Buying and Managing an Investment PropertyMoneysmart is a Federal Government website, brought to you by the Australian Securities and Investments Commission (ASIC), the corporate, markets, financial services and consumer credit regulator in Australia.

Licensing statements: Credit Representative CA25559 is authorised under Australian Credit License 389328 General disclaimer: Your full financial situation would need to be reviewed prior to acceptance of any offer or product

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