With interest rates at record lows, more people are deciding to buy an investment property to help fund their retirement – but some problematic trends are emerging.
Buying property is a great way to create wealth over the long term, as long as you avoid simple mistakes at the outset of your property investment journey.
The sad fact is that many rookie investors never buy more than one investment property because they make avoidable mistakes from the very start.
These simple mistakes, such as failing to undertake enough research, selecting the wrong home loan or not obtaining a tax depreciation schedule, can be the difference between success and failure for first-time property investors.
Avoiding these simple mistakes means that rookie investors can build a successful property portfolio and thereby create long-term personal wealth.
Below are some of the mistakes made by investors:
- Buying an investment property without thoroughly looking at capital growth and rental return potential. Research is critical when buying an investment property.
- Buying an investment property close to home rather than looking at investment opportunities throughout Australia.
- Failing to seek independent information. It is important to seek out people who own several investment properties and ask them how they managed to build their portfolio.
- Managing the property yourself.
- Not undertaking a full assessment of the true cost of buying and holding the property.
- Selecting the wrong home loan (i.e. principal and interest), which is typical for an owner occupier home. Instead first-time investors should focus on interest-only loans, which will help increase cash flow.
- Buying a property in a location that is not attractive to tenants i.e. not close to amenities such as shops or transport.