Lots of people say if you get your first property investment right, everything else will be smooth sailing in your property portfolio. The statistics, however, tell a different story. According to property investment expert, Michael Yardley, approximately 50 per cent of property investors sell their portfolio within the first five years. Of the other 50 per cent who remain in the market, 10 per cent never own more than two properties. To make sure you’re setting yourself up for success in property investing, there are some key mistakes you need to avoid so you can strengthen your property investment strategy. Here are the mistakes you need to avoid to set yourself up for property investment success.
Buying in the Wrong Location
The majority of your property’s performance is hinged on its location. Therefore, it’s important you get this step right when you’re looking for the next property to add to your portfolio. There are specific growth drivers you need to look for in a property. Many of these growth drivers will be associated with the amenity, infrastructure and access that suburbs in the inner and mid-suburban areas of capital cities offer. Of course, there have been cases where regional centres have experienced astronomical growth, but if you’re looking for sustainable, long-term capital growth, this is most often found in Australia’s capital cities.
Assess Rental Yield Properly
When you’re looking for new investment properties, sales agents may over-inflate the rental yield you can expect from a property. Whether intentional or not, sales agents are obviously more in tune with sales statistics, which is helpful, but you’ll want to get an expert opinion on the rental market too. To do this, talk to a local property manager who can give you a realistic expectation of rental yield in the area.
Be Strategic About Finance
Structuring your finance properly is crucial for the long-term success of your property portfolio. To make sure you’re not doing things like trying to refinance when credit has tightened, make sure you’re aware of the broader macroeconomic picture in Australia and abroad.
It’s helpful to have an understanding of things like the business and credit cycle. Enlisting a trusted financial adviser who can help you not only use your financing to buy property but to help you effectively structure your portfolio to reflect current market conditions is useful too. This can include something like a line of credit for emergencies or a mortgage offset account to see you through tough market conditions.
Property investing is an excellent vehicle for building long-term wealth, but it doesn’t come without its challenges. Make sure you’re methodical and logical with your approach to property investing and build relationships with trusted advisors who can give you an objective view on your strategy and any additions to your portfolio.