Property Investing: Top Mistakes You Must Avoid

By: Jency
28th Dec 2021
Rent & Invest

Due to the constantly growing demand for property within cities, you can be assured of a good return on investments from property within such locations. This is why property investment can be considered as one of the most rewarding and lucrative investments.

If you are still in the beginner’s stage of property investment, it would help to know some of the most common investment mistakes that people make while planning to buy a property.

As an investor, learning about such mistakes so that you can make sound decisions in your investment and avoid financial loss.

  1. Underestimating the Importance Of Location

    In seeking higher returns, many property investors go after the short-term rental market. Do a thorough research about the location of the rental property that you are planning to buy. Consult expert advice from property managers to identify locations that have the highest occupancy rate, ideally at 70% to 80%.

    If possible, spend time in the area and pay attention to what that particular location has to offer. Properties with close walking distance to public amenities can be in high demand. Proximity to public transport is also an added advantage.

    Keep in mind that location is also important if you’re investing on a property for re-selling. It goes without saying that factors such as amenities and nearby infrastructure will always fetch a higher re-sell price.

  2. Relying Too Much On Future Plans

    Buying a property that is yet to be built can be financially rewarding, but you need to go in after doing a thorough research first. Imagine a scenario where you purchase one of the first few lots in a new development, only to find that not many end up buying in that property development and it becomes a stunted development. Although you will have to pay more only when you come in later, it is best to wait until the development progresses to a certain extent. Before deciding on a pre-constructed property, remember that its future value is based on the community and amenities that eventually develop around it.

  3. Not Understanding the Market

    Another big mistake a real estate investor can make is not understanding their local property market. Understanding a market is more than just knowing a city or a neighbourhood. It requires knowing and understanding the basic demand for the type of property you are investing in.

    For example, if you like investing in high rise units, you will not be successful if you do not understand the market for buyers and renters of high rise units in your chosen location. You must also ensure that your property meets the requirements of most renters or buyers. Failure to do this may cost you a lot of money in the long run as your property will fail to garner a potential renter or buyer.

  4. Failure to Do Due Diligence

    More often than not, when a property investor ends up with a property that is unprofitable, the fault is none other than the investor’s own. Always do a thorough due diligence on the property. Failure to do an adequate amount of homework on a property, a neighbourhood, or generally a property market is a mistake that many investors make.

    Do a detailed check on assumptions in your investment plan for important market details of the property. For example, if your plan requires selling a property at market price after holding the property for less than one year, but the average time on the market for that kind of property is 1.5 years, then you are setting yourself up for disappointment.

    In addition, due diligence on an individual property itself is a must. Understand how to look out for damages within properties so that when the time comes for you to invest in one, you would be able to identify properties that have too much damages.

  5. Not Checking the Developer’s Reputation

    When you choose a reputed and trusted property developer, you can rest assured that your investment will most likely gain returns. A stable and renowned developer will obtain all relevant legal permits and documents required for property sale. If you are buying property from a reputable developer, you can be assured of good quality construction and excellent customer service. Browse through the company’s website, project sites and social media pages to get more information about them. Apart from that, you can also acquire feedback and comments from previous buyers about the developer.

  6. Not choosing the right type of property

    When you have made the decision to invest in a property, the next step would be to choose the type of property that you will be investing in. You can choose between a residential property or a commercial space. Choosing the wrong type property that does not suit your investment style can put your money at risk and result in poor returns. Choose to purchase properties in prime locations as such properties will always have good demand. Also, properties with good access to facilities will fetch high resale value. List out a few properties and seek help from professional property agents to find the right option according to your budget and expectations.

    Other common property investing mistakes to be avoided are:

    • Buying at auction – Paying more than others is not a good investment strategy.
    • Overcapitalising – It is important to purchase according to your budget.
    • Not getting professional help – It can get more difficult to do everything on your own.
    • Buying in rural areas – Properties within rural areas will have less pressure on pricing
    • Waiting for a down trend in the market – Most of the time, the property market will keep rising.

The statement and information in the articles are the opinion of the writer and meant only as a guide. Any property purchase, rental or lease involve many legal issues and other complication depending on the individual facts and circumstances. Readers and Users are strongly advised to seek professional advise including from qualified and competent lawyers, bankers and/or real estate agent to verify the information and the statement before embarking on any purchase, rent or lease of any property. To the fullest extent permitted by law, we exclude and disclaim liability for any losses and damages of whatever nature and howsoever cause and arising including without limitation, any direct, indirect, general, special, punitive, incidental or consequential.

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