As a new investor, there are a number of mistakes which can be avoided when creating a property portfolio. Inexperience is a weakness on which crooked individuals hope to capitalise. But you can beat all this hassle by simply avoiding the listed mistakes.
Buying the Wrong Property
One of the most common mistakes made by individuals planning to invest in property is to acquire the wrong type of investment property
. And ‘investment
’ is the keyword, to be honest, where you need to look at the property through the critical eye of a landlord and not a land-owner. For instance when looking at villas for sale in Sri Lanka you need to consider the requirements of the renter, generally, a holidaymaker, looking for a beachfront location maybe, together with space and light. If you plan to rent out your property look at the pros from a renter’s point of view.
- Good location and convenient travel links
- Spacious rooms
- Does it appeal to the target market with regards to the location
- Who is your target market; holidaymakers, individuals or families
Not Doing Homework Before Buying the Property
This serious error can be accurately likened to committing financial suicide. Yes, that’s right folks you need to do your homework on;
- Who is renting property in the local market
- How much do they pay for rent
- How big is the demand
- What’s the demography of the area’s population
- Is it your typical family neighbourhood, or a commercial area where office workers from outstation are seeking lodging, better still is it a resort style location where a holiday rental is always in demand – knowing these simple details will help you buy a winner and rule the property market (or at least start your journey to get there)
Underestimating Your Costs
New investors often run into cash flow problems by simply underestimating the time and cost required to make a property rent worthy. Always keep a buffer, by simply getting quotations for required renovation work and multiplying that figure by two (at least)
Not Having Reserve Funds
You must have a reserve cash flow to back you up. Not having enough cash to follow through on expensive repairs leads to cheap work and worse – angry tenants!
Not Choosing a Smart Finance Path
Structure your property loan in a manner that you reap the best tax benefits. Choose a lucrative long-term plan, such as an interest only home-loan.