When it comes to purchasing investment property it is virtually impossible not to make any mistakes; the real challenge is to turn your mistakes around to your advantage. I have been an investor for five years and I have made innumerable mistakes but I have learned from them and made progress, remembering never to make the same mistake twice.
My worst mistake was probably buying a house on a flood plain; the property flooded just after I’d renovated it as did the rest of the village but the insurance paid out, the repairs were done and now I have an even better house.
Don’t put all your eggs in one basket:
That may be a bit of a cliche but when it comes to property investment it is one of the unbreakable rules. Often you hear of investors going bankrupt overnight because they have bought several identical apartments in the same development and have found to their horror that the rental yields were nothing like their initial expectations. It makes sense to purchase properties in several different locations – If a nearby factory shuts down in one area you risk the possibility that all your tenants may become unemployed at the same time. In much the same way it is prudent to distribute your financial wealth in several different banks or building societies.
Be prepared:
Being prepared for any eventuality is always advisable as things will invariably go wrong and it will be your job to put them right. You will need to adapt to the situation and react quickly. If the mortgage rates increase then so must the rent – it’s all about cause and effect. You have to say to yourself that it was your choice to quit the nine-to-five and become your own boss so now you must bear the responsibility that goes along with being a Property Investor. It was a commitment I was willing to undertake when I bought my first investment property by re-mortgaging my own house and I remember thinking: “I’d better make sure I get this right because it’s the roof over my own head that’s at risk.”
Avoiding mistakes and pitfalls means you must do an incredible amount of research first before making any major decisions or taking on any far-reaching financial commitments. Do you have enough resources at your disposal if a boiler needs replacing at short notice or surplus funds are needed to cover void periods when a property becomes unoccupied? Do you know how to deal with difficult tenants who think you are made of money and are only there for a free ride?
Never skimp on costs when it comes to workmen:
A botched job will devalue your property. If in doubt call in the professionals; “Cowboy” builders are to be avoided at all costs. When it comes to houses it is no use papering over the cracks; they will still be there, getting wider. A job well done will add value to your property, provide your tenant with a better home and save you money in the long term. Always use the best possible materials and don’t cut corners. Any reputable surveyor will notice immediately if an inferior job has been done in order to cut costs.
Always think in the long term:
E=mc2 is not any easy equation for most people to understand so I invented one of my own: Time + Bricks = Money. This equation may or may not have a mathematical basis- I don’t know, I’m no Einstein but I do know that one common mistake for the novice investor to make is to expect too much too soon from their investment and be thoroughly disappointed because in the short term your houses may actually cost money. Be warned: money which is taken out before your business has had a chance to become established and is spent on anything other than property will have a detrimental effect. Any ordinary person can become a successful investor but time must always be an essential part of the equation.
Avoid letting furnished accommodation if at all possible:
Furniture invariably goes walkabout or there is a custody battle over it at some point, so prevention is better than cure. It is also possible to get lumbered with a house full of useless items you can really do without which a tenant has most kindly left behind in lieu of rent – and you are left to dispose of it at short notice before the new tenant moves in.
Learn from the mistakes of others:
It is also quite possible (and not half as expensive) to learn from the mistakes and experiences of others in the property business. It is always useful to join a Landlords’ association where you will receive plenty of help and advice from people who already have years of experience behind them.
May your property business be successful but remember you will only get a return on your investment if you are prepared to put huge amounts of time and effort into your proposed venture first. Making mistakes is inevitable but the chance of them happening in the first place can be reduced enormously if you have done your homework first. And as long as your houses are going up in value and not in flames you must be doing something right.