Investing in property can be a fantastic way to build wealth over time. Property investors can create a property investment portfolio that continuously generates income, and can also be passed along to their children. This also shows that investing in property can be a great way to have a financially secure future for you and your family.
However, achieving property investment success can be challenging if you’re careless or ill-informed. As with other major financial commitments, it’s always smart to do your research, consider your options, and educate yourself so you can avoid committing crucial mistakes that will prevent you from reaching your property investment goals, such as the ones below.
DONT FALL FOR THE FIRST PROPERTY YOU LIKE
Investors often feel many emotions when they look at the first property in their search. They may be excited about the beginning of their journey towards investment success, for example, or concerned about making the wrong choice. Casual advice often tells people to “go with their gut” or “let their heart guide their choice,” but research shows that this advice can be misguided. When decisions are made based solely on emotion, they are generally irrational. An investor might forget all the careful research they did and pick the first property that they like because it “feels right,” even if doing so can lead to problems such as dealing with hidden structural defects or the property not having good ROI potential. It’s possible that the first property you see is the right property. However, to help ensure you’re making the right decision, we recommend consulting with experts and getting more property investment education insights when in doubt.
At Calla Property, our team of experienced property investment specialists can help. Through our award-winning research methodology Calla Property Insights, we’ll select the property that best fits your investment aims.
BEING FINANCIALLY UNPREPARED
Purchasing the property itself is just the first step towards having an investment that is successful over the long term. However, many investors forget that the purchase price or the monthly mortgage is not the only financial cost they have to prepare for. Other costs associated with buying property can include inspection and conveyancing fees, transfer duty, and council rates. Prepare to shell out even more if you’re planning to renovate the property you purchased—the cost of renovating a single family home in Australia can be more than $33,000, and the cost of renovating a multi-family investment property will be much higher. If you’re aiming for rental property, you will need to include in your budget the salary of a property manager, which is around $49,000 on average in Australia.
If you aren't financially ready to purchase a property, you may end up without enough cash to make your payments. This can push your property into foreclosure, which will be a tremendous blow to your credit and to your investment portfolio.
NOT CONSIDERING LOCATION
In the urban areas of Australia, residents are much less likely to own a car than their suburban and rural counterparts. In Melbourne, for example, 76% of residents don’t have a car; in Sydney’s CBD, that figure is at 59%. In Adelaide and Brisbane, the numbers are slightly lower but still significant enough to affect your location decision. Therefore, in urban areas, it makes sense to look for investment properties that are closer to transportation hubs as this can entice more people in terms of convenience. Transportation is just one factor when choosing a location. People also value being nearer to amenities. For example, research shows that living close to high-end grocery stores or excellent schools can significantly boost property values.
Failing to consider your investment property’s location can lead to a property that may look nice but doesn’t attract enough demand for it to be financially successful.
EXPECTING TO GET RICH QUICK
Property is a fantastic, reliable investment—as long as the investor is willing to wait. Property values tend to increase over time, but in the short term, they can fluctuate rapidly. Some people can build successful incomes by flipping homes (buying a single family home, renovating it, and then reselling it). Australia has seen a decline in this practice, however, possibly due to the increasing transaction costs associated with buying and selling property.
Economists suggest that a property should gain about 1% of its value each year. The longer an investor holds onto a property, the higher the potential value of their investment. If they are gaining passive income from the property, particularly through rent, holding that property becomes even more valuable.
In other words, if you’re looking to get rich in a snap of a finger, you may want to look for other options. However, if you’re committed and do things right, property investment can indeed be financially lucrative in the long run. Research also shows that in Australia, property located in a capital city will double in value, on average, every 11 years, and in regional areas, every 15 years. This indicates that compound interest is indeed the eighth wonder of the world, as Warren Buffet asserts.
INVESTING WITHOUT A PLAN
When investors come into the market to buy a property simply because they heard it was a good investment, they may struggle to succeed. Having a plan is crucial; you also need to clarify your goals and assess your current situation. For example, investors who buy a property at 25 because it will be a step towards a retirement fund in their twilight years might look for different properties compared to those in their 30s or 40s who are hoping to gain additional passive income.
These are good reasons to invest in property, but each requires a different investment strategy. Not having a plan or a clear definition of what you want to achieve can lead to problems such as being a stuck with a property you can’t afford or one that doesn’t really suit your investment needs. Property investment is an excellent way to have a financially rewarding future. However, it does need careful thought and consideration, and getting help from experts can go a long way.
At Calla Property, we understand the goals you’re trying to achieve, and we’ll help you build your future by selecting the best property for reaching them. If you have any questions, feel free to contact us. Disclaimer: No part of the information here is intended as advice. This is for general information purposes only.