Avoid these mistakes when investing in property
According to the CEO of FNB Private Bank Lending Praven Subbramoney, many inexperienced investors get it wrong when selecting their first couple of rental properties.
Here are some rental property buying mistakes to avoid:
1. Emotions:
Avoid "falling in love" with a property but rather weigh its capacity to attract quality tenants. Don't search for features that appeal to you but look at the market that you are making your target.
2. Hasty decisions:
Interact with various property agents and see at least five properties or units in the area before finalising on a property. Inform the property agents that you are looking for investment property and keeping your options open. This will assist you in negotiating a good rate and an informed decision.
3. Cost of Maintenance:
Establish the type of maintenance required for a property is always a good idea before you buy the property. With a property investment plan, the idea is to make as much money while preventing continuous expenses like maintenance.
4. Investigate rental yield:
Research how much properties are being rented out for in the area before buying the rental property, don't just take the estate agents word about the rent price. This could result in you ending up with a low rental yield and low capital growth property. This could cost you and you may have to resell the property.
5. Talk to experts:
Don't be shy to share ideas an and seek advice from property investors that have experience. Try to join a property investment group, advice from experienced property investors will help you in your endeavour.
6. Cheap property or good business opportunity:
Do not snatch up a home because of its rental price. The property could in fact be a recipe for disaster. Create a strategy based on your rental property ability and then buy a home that suits your plan.
7. Inspect the home:
Send an inspector to the house to comb it over before making your decision. But don't just stop there, ask the inspector questions which in turn could shave off the price of the property.
8. Overlooking the fixer-upper costs:
Purchasing a fixer-upper might save you some money but do not underestimate the amount of money needed to renovate the house. To be on the safe side budget for twice the cost of the renovations when weighing the investment.
9. Underestimating outgoing costs:
Factor in all the outgoing costs before making a final decision. Expenses like routine maintenance or taxes can chip away at your profit and can decrease your earnings.