The Top 5 Mistakes Smart People Make When Investing In Property

The Top 5 Mistakes Smart People Make When Investing In Property

Property is a wise investment, if you’re smart about it. It is also a big step and even the smartest people can make mistakes if they don’t have the right information and professionals helping them. Miriam Sandkuhler, CEO of Property Mavens (property investment advisory firm) shares the top 5 mistakes she has seen smart people make over the years of running her property advisory firm and offers up some great tips on how you can avoid making those same mistakes.

Mistake #1: Not Getting Expert Advice

“The most common mistake is not getting the right advice, from the right experts, at the right time.”

Tip: Hire An Expert - there are experts you need to engage along the property purchasing  journey. Know who those experts are, understand why you need to engage them, and at what point in time you should reach out to them. While people may think it’s going to cost them money to engage an expert, Miriam warns, “In reality, an expert will help minimise risk and maximise return.” Not bringing an expert on board at the right time can put you at risk of making a very costly mistake.

• From the beginning of your journey, you need a mortgage broker, accountant, buyer’s advocate, solicitor or conveyancer, and Building/Pest Inspector
• Once you have made your unconditional purchase , you want to engage a property manager and insurance broker.
• Finally, once the property has settled you need a quantity surveyor to obtain a depreciation report, so as to maximise any tax benefits you are entitled to.

Mistake #2: Over-Analysis or Waiting for the "Best Time”

"What a lot of smart people do is analyse everything, but it can lead to paralysis.” Buyers often want to wait until the best time to invest and try to time the market, which Miriam says is “more of a trading mentality than a buy-and-hold mentality.” Analysis is meaningless if it leaves you unable to take any action.

Tip: Accept that the Market Constantly Changes – Financial institution lending policies and the property market constantly change. If you qualify for a loan you need to get cracking and buy ASAP, because banks can change their policies at any time. The market isn’t perfect and you probably won’t find the perfect deal. Miriam says that, “If you can tick at least 80% of the boxes (being the right criteria and attributes) then you should buy rather than wait for 90 – 100%.”

Did you know?

• Time out of the market costs money and lost capital growth
• Getting stuck in over-analysis is a behavior that gets in your way
• A buyer’s advocate will help you wade through the concerns you have that may stop you from getting a favourable outcome in a timely manner

Mistake #3: Putting your Personal Expectations onto the Property

“When people buy investment property, they put a lot of their own personal filters onto the properties that they’re looking at.” Projecting your own preferences and emotional thinking onto the property is a big mistake. Buying an investment property is not like buying a home.

Tip: Be Prepared to be Flexible - If you aren’t buying a block of land and building, you need to be flexible because you won’t get 100% of what you want. You need to accept that property is not perfect. If you get stuck on the idea that it needs to be, then you will miss out and not end up buying, while prices could continue to escalate. Other things to be flexible on:

• Expectations of what you want to pay versus what you need to pay to buy it
• Understanding that different parts of the market will perform differently

Mistake #4: Incorrectly Comparing Property Pricing

“Pricing is complex. Properties are different. Very few properties are the same. You aren’t comparing an apple with an apple with an apple.” There is expertise that comes in knowing and understanding how, why and where prices will vary.

Tip: Get an Expert who Understands the Variations - An expert can shed light on important things like the type of title, zoning consideration, land size, block shape and value. You also need to consider property type, style, size, and construction. All of these factors will go towards pricing the property and can determine if the agent is underquoting You could potentially overpay if you get this wrong as pricing property is a very complex thing. A licensed buyer’s agent can help you with this.

Mistake #5: Misunderstanding Supply & Demand

“People make the assumption that there will always be another property around the corner.” When you are in a market with a higher demand than supply, you might end up paying a lot more for another property down the track. Miriam says if you have an attitude of “something better will come along, the grass is greener, or there’s always another one” you may end up paying a lot more for it. Don’t let your ego get in the way.

Tip: Remove Your Personal Filters and Belief Systems – Ensure that you have key research to understand supply and demand factors. You need to make a clear decision whether or not you are going to buy it and what benefit (if any) there is to holding back. False expectations get in the way, and so do savvy real estate agents who are telling you what they want you to know, not necessarily what you need to know. A licensed buyer’s agent can help remove those filters and blockages that get in the way of making a good decision.

If you are thinking of investing in property and want to avoid making some of these top mistakes, check out the quiz on Property Mavens website to see what you know and where you might need help! Remember, it doesn’t matter how smart or educated about the market you are. A good buyer’s agent has 20 plus years experience and every transaction is different. 

A buyer’s agent in Melbourne or your own city can help you make more informed choices. If you’re looking for a buyer’s advocate in Melbourne to help assist you with purchasing an investment property, Property Mavens has you covered. 

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About Miriam Sandkuhler, Property Investment Advisor