Mistakes property investors should avoid

Purchasing investment property is risky, however, it also is a chance to earn a lucrative extra income. Expert real estate investors tend to have a better understanding of the property markets and spotting a great investment, while potential and first-time investors are more likely to make a wrong call which can often be costly. Here are common mistakes property investors should avoid: 

Giving in to emotions
When investors allow their emotions to overpower their logic and cloud their judgement they may not be able to negotiate the best possible price and outcome for their investment goals. Lisa Connellan, Sales Manager at Knight Frank suggests: "A true investor must make a purchase based on a business decision and not their heart. Often a new investor is too choosy as if it was going to be their own home." The key is to think about the end goal for the investment. 

Overlooking finances
Investors should do an in-depth budget and cash flow analysis to determine an accurate financial position. This will allow the investor to determine what they can and cannot afford. Going over the budget could be the worst mistake when investing in property. Investors are encouraged to shop around for the best deals from banks and financial institutions when securing a home loan. Also, bear in mind that a deposit of between 10% and 30% of the purchase price may be required. "Investors often don't consider total costs which include levies on a sectional title building or estate. Include these in your yield calculations," adds Connellan.

Location
With any type of property, the location plays a vital role in the success of your investment. Tenants will always seek locations that make their lives more comfortable. An apartment in the city will suit a bachelor or young couple who value close proximity to work and the social scene. Connellan advises: "Investors must look at location first and then determine what a likely tenant will require in that area." Families with a pet would prefer a home with a garden, good security, and conveniently located near a great school. Avoid investing in areas that will not be beneficial by doing extensive research on the place and surrounding neighbourhoods. 

Holding on to dead weight
Often, when the investment property is not performing as expected, owners tend to hold on in the hope that it would. In such a case, the investor needs to evaluate if it is an unfavourable market or a poor investment choice. If the market is bad and there is a great possibility of recovery then holding on can eventually become profitable. However, if the property is simply the dead weight that is costing money then selling is the best option. Taking a slight hit now will avoid a bigger hit in the future. 

All investors have intentions of being successful in the real estate business, but to do so they need to avoid any pitfalls that could leave them in debt. Contact Knight Frank for expert property advice and we will assist you in getting the right answers to all your questions.