3 property portfolio mistakes you should avoid
Many aspire to break into the property market to build wealth. However, that is easier said than done. In fact, thinking that all you have to do is buy properties and wait for them to gain capital growth and collect rental income is a dangerous assumption.
This oversimplification is often passed around and it needs to be discussed. If it was really easy to build a multi-million dollar portfolio, everybody would have done it.
If you ask veteran investors, not all of their properties are generating income. In fact, some rake in lots of dollars per month. Meanwhile, other properties don’t gain much value after years.
Every property is unique, and therefore a strategy that might have worked for other people has no guarantee of working for you. Times change, the market moves, and things like a pandemic happen.
An excellent property portfolio is possible because of an investor’s foresight, knowledge, timing, and strategy.
To help you prepare further and lower your chances of acquiring properties that underperform, here are some mistakes you should avoid when investing in real estate.
Not doing your own research
When you begin hunting for your first property, it’s not as easy as going to house showings and choosing after like you would do in the supermarket.
Prior to setting an appointment with a real estate agent, you must do your own research. Remember that a lot of what you will hear will be sales talk with the goal of, well, getting you to buy.
This is not to say that they are tricking you, but you would get to know better the property, the location, and the market if you had done research prior to checking it out. There may be things that an agent might fail to mention. For example, they could say that the area expects a lot of establishments to come in so it would be a great investment. It could be true, but if you did your research, you might find that there is already an oversupply of houses in that market. And that regardless if more and more establishments are to come in, the property has a great chance of underperforming.
Making rushed decisions because of fear of missing out
Whether it’s with the stock market, property market, and other kinds of investments, the fear of missing out is something that grapples beginners. It is understandable. Emotions are high when big movements affect the market which triggers a reaction in investors.
For example, in 2021, the housing market soared to new heights. If you are a beginner, you probably had thoughts like, “Why didn’t I buy a property a few months back?”
News of other investors making over 30% in sales because of the market movement while you sit alone with your questions might further trigger such thoughts. So you think, maybe there is still time, that maybe you can still ride the wave by making an impulsive purchase right there and then. You go to your bank and take out the max loan that you can get to make sure you don’t miss out.
This doesn’t seem like a very smart strategy, does it? You have to understand that prices are not gonna stay up constantly. You missed this one uptrend in the property market. It doesn’t mean you will be stuck behind forever. It doesn’t mean your portfolio is ruined. The fast and consistent growth you observe in a series of months is not going to sustain itself. At some point, it will dip.
While it is not wrong to ride the wave, the point here is that you could lose a lot in the end because of miscalculations and hasty decisions. Do your research. Are you still convinced that you can make gains? That is despite having to take another mortgage at full interest? If yes, then go.
Listening to the wrong people
When you first start out in your portfolio-building journey, you will also start to build a bigger network. You will meet a lot of people–seasoned investors, beginners, real estate agents, and mortgage brokers among others.
They will be a great help as you move along. In fact, you can even get insights from them about what you should look for in your first property. However, you have to do your own in-depth research of the market instead of just relying on information that you hear.
In the business, you will meet people who will say they have your best interest at heart, but really, they are just trying to close deals.
Once you find people you can trust stick with them.
Since property investing is a leveraged venture, you have to be with people whose goal is to help you reach your financial goals. Our mission is to help you do this by giving you the best product offers that suit your needs. Start your journey with a consultation with us!