No investment is a sure thing and many people getting into property make some common mistakes. In this post, Bliss Conveyancing lays out the common errors so you can avoid making them at your own expense.
Look Twice, Then Jump
Australia’s residential property market is one of the most attractive in the world. Investors from all over the world are drawn to Australia in the hope of making lucrative returns. However, investing in Australian residential property is not without its challenges. See our post on investing fundamentals here. There are several common mistakes that investors make when considering Australian residential property as an investment. This blog post will discuss these mistakes and provide advice on how to avoid them, using a range of sources of information.
1. Underestimating the Importance of Research
One of the most common mistakes that investors make when considering Australian residential property as an investment is underestimating the importance of research. Property investment requires a great deal of research, and investors must consider a range of factors, including location, market trends, and potential rental yields.
According to the Australian Securities and Investments Commission (ASIC), investors should research the local property market thoroughly before investing in any property. This includes researching the local area’s demographics, employment rates, and infrastructure, as well as the potential rental demand and rental prices.
2. Not Considering Property Management Costs
Another common mistake that investors make is not considering the cost of property management. Property management involves a range of tasks, including finding tenants, handling maintenance and repairs, and collecting rent. Investors who fail to consider these costs may find that their investment returns are much lower than they had anticipated.
According to the Real Estate Institute of Australia (REIA), property management costs can vary significantly depending on the type of property and the location. Investors should carefully consider the costs of property management and factor them into their investment calculations. They may also want to consider engaging a professional property management company to manage the property on their behalf.
3. Failing to Account for Unexpected Expenses
Investing in property is not without its risks, and unexpected expenses can arise at any time. Investors who fail to account for unexpected expenses, such as repairs, maintenance, and vacancies, may find themselves struggling to cover these costs, which can eat into their returns.
4. Investing Based on Emotion Rather Than Logic
Another common mistake that investors make is investing in residential property based on emotion rather than logic. Property investment can be an emotional decision, particularly when the investor is making decisions as if they were going to live in the house themselves.
5. Failing to Diversify
Diversification is a key investment strategy that many investors overlook when investing in residential property. Investing in a single property in a single location can be risky, particularly if the local property market experiences a downturn.
Investing in Australian residential property can be a lucrative investment opportunity. However, investors must be careful to avoid common mistakes, such as underestimating the importance of research, not considering property management costs, failing to account for unexpected expenses, investing based on emotion rather than logic, and failing to diversify. By carefully considering these factors, investors can make informed decisions and achieve good returns on their investments, using a range of reliable sources of information.
