July 19, 2024


The Intersection of Information and Insight

Don’t fall for these 3 huge property investing mistakes

5 min read

There are several mistakes that I regularly see property investors make.

From emotional investing to failing to mitigate risk or even failing to get the right advice, many property investment mistakes cost a lot of money, time, and stress and can even hijack your investment success.

Having helped hundreds of property investors with their property acquisitions, I have been able to gain a great perspective as an “outsider” on how property investors go about making their investments.

And sadly, there are 3 huge and very simple mistakes that I see crop up time and time again.

Doing these things might not initially cost you a lot of money, take a lot of time, or maybe even change the way you invest.

But they will certainly affect the outcome of your investment and its potential for capital growth.

After all, as we know, strong capital growth is key to investment success.

Because the more capital growth you achieve (even at the cost of lower rental income) the more wealth you will accumulate in the long term.

Remember, capital growth isn’t taxed while rental returns are, and as your property increases in value, the rent increase will also generate more cash flow in turn, so capital growth is a much more important driver of wealth creation than cash flow.

Capital growth is key – and that’s why it’s vital to avoid these property investing mistakes I see so many investors make…

Mistake 1. They focus on ‘cheap’ properties

The cheapest property in Australia today will almost always be cheap in the future too.

Remember that location does around 80% of the heavy lifting of your property price growth.

This means that if you’re looking at ‘cheap’ properties in ‘cheap’ locations, they’re almost always unlikely to experience anywhere near the capital growth of good investment-grade properties in A-grade locations.

While it may be worth noting where cheap property in Australia is located as part of your preliminary research, that’s where it should end… at the research stage.

How to avoid it:

When you’re starting out it can be difficult to spot what a good investment looks like, so it’s easy to fall down the route of just searching for what’s available for the lowest price or on short-term cash flow, like rental yield.

Building wealth through real estate is best achieved by buying quality investment-grade properties and holding them for the long term, allowing the market to do most of the hard work for you.

I’ve met so many investors who are fixated on cheap property or rental yields – but for me, capital growth is always the number one thing to look out for when buying an investment property.

Mistake 2: Only buying where they’d want to live

Another mistake I see so many investors make is only buying investment property where they’d want to live, or in their own backyard where they already do.

While many property investors only buy properties they would feel comfortable living in themselves, it’s easy to be blindsided by your own personal preferences and risk sacrificing a property with excellent capital growth potential because you don’t like the size of the bedrooms, the distance from the beach or the floorplan.

This can lead any investor down the path of paying too much for the wrong property purely because they’re led by their own preferences… or worse… by their own emotions.

Investment Grade

How to avoid it:

Remember, as the investor, you won’t be living in the property, and chances are you probably won’t be the target market for it either.

If you find that you are emotionally drawn to a property to the point that you are compromising your investment strategy, step back.

By the way, you do have a documented Strategic Property Plan, don’t you?

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