2 common pitfalls of property investment

Monday, 4th May 2015

pitfallsProperty investment is a great way to significantly grow your wealth, however there are many common mistakes that investors continually make.

While property investors generally focus on the features and requirements needed to become successful, many often forget to consider the aspects and strategies that should be avoided.

Here are two common pitfalls of property investment that investors should generally avoid.

  • Taking advice from the wrong people

Selling agents and property spruikers are usually working in the best interests of the seller or developer, not working in your interest as a property investor.  No matter how helpful these people may seem, they don’t work for you. Selling agents work for the seller and are legally obliged to act in the best interests of their client. Developers, on the other hand, are interested in selling their stock and making profits – they aren’t usually motivated to sell you a great investment property that will experience strong capital growth. Similarly, property spruikers generally make their money by receiving commissions from developers or selling agents. Some property spruikers also just want to make a quick buck and provide ill-informed advice or sell you sub-standard investment properties.

  • Following the herd

Property investors all too often follow the herd. When the property market is hot, many investors will make irrational decisions fearing that they will miss out on capital growth. On the other hand, when the market slows, many investors will defer investment decisions until the next upcycle. To build your wealth through property investment, you need to remain focused on your goals. You shouldn’t purchase your next property simply because the market is hot. You need to consider how this fits in with your broader investment plan. Similarly, you shouldn’t shy away from a cool market. Generally, there are many benefits of buying in a soft market including increased housing stock, less competition, more bang for your buck and more power in contract negotiations. Buying in a soft market helps ensure you don’t miss the next upcycle.