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Ask any property investor if there were things they wish they knew before starting out, and they will all say “yes” without hesitation. Hindsight is a wonderful thing, isn’t it? The great news is, you can learn from the mistakes seasoned property investors have made before you, and start out with the benefit of hindsight on your side.
Here are five tips successful property investors wish they knew when they were in your shoes:
1. It’s Okay To Have Someone Else Manage Rentals
When you’re starting out on your investment journey, it’s easy to be precious about each property, wanting to manage it yourself and stay hands-on. The problem is that this takes a lot of time and energy – valuable resources a commercial property management company could be saving you. They will also ensure that you’re fully rental law compliant, protecting your tenants’ safety, and helping you avoid any nasty fines, penalties, or legal battles.
2. Forecast Cash Flow For Longer
Many investors are short-sighted when it comes to cash flow. Without experience, you may look at the typical monthly outgoings and incomings and see that it’s a workable flow. However, it is rarely as simple as tenants paying rent, you paying your mortgage, and then banking the remaining money. There are multiple other fees to consider, including:
- Property management fees
- Emergency expenses
- Certification and law compliance costs
- Vacancy costs
- Insurance & taxes
- General property maintenance
If you account for those costs across each rental term, and the numbers still work out, then you have an accurate and workable cash flow.
3. Investing Should Not Be Emotional
If you’ve ever hunted for a house to make your home, you know that it is an emotional journey. You are trying to imagine yourself living there, making memories inside those four walls.
Because you’re used to this process, when you start investing in property, you may naturally lean on your emotions to guide you. This is a mistake that can prevent you from making a sound business decision.
It is important to think of this process financially and logically to make the best investment choices. Doing it this way means you’re going to be better placed to negotiate hard to get the lowest price, which then gets you the best possible profit.
4. There Is No Perfect Deal
After all your research and the time you’ve invested into learning how about property, it is possible you have what you feel are the ideal ingredients for the perfect deal. The problem with this kind of mindset is that you may consistently pass up great deals because you’re waiting for the perfect one.
Whilst you should have a set of standards you stick to, it is important to be ready to negotiate and carefully target growth areas to get good (but not necessarily perfect) deals.
5. Don’t Be Tempted By Low Property Prices
Low-end rental estate can be tempting, and experienced investors in that niche can make a lot of money in it. However, it is a specialist area of investment that is not for most investors, especially new ones.
The numbers can be very tempting, but they are often not worth it long-term. You’re far more likely to face problems with tenants in these areas, and the chances of the property appreciating in value are far more uncertain. The golden rule is to only invest in areas you would be happy living in yourself.
Using the tips above, you can get ahead in real estate investment. Skip these common mistakes, and instead, grow your property portfolio the intelligent way.