10/10/2017| Posted by: Richardson Real Estate, Investing, Real Estate Colac

Six Mistakes Investors Make

Looking to purchase your first investment property? Or considering adding to your existing portfolio, either way it is important to do your research on your next investment. Here are our common investment mistakes to avoid.

1. Inadequate research
Research, research, research. The key to prudent investment is to know what you’re buying. Consistent with the old adage, if it’s too good to be true, it probably is. Always make sure that you have a conveyancer or legal practitioner check over the section 32. If you’re planning on developing, overlays, easements or other restrictions may limit your ability to develop according to your plan. Research should extend to factors such as projected and historical growth rates and planned infrastructure such as new rail and road.

2. Delaying increase of rent
Although the temptation might be to keep rents low to ensure your star tenant continues to rent your property, this can prove costly as you are forgoing any increase in rental income. Monitor the market and talk with your Property manager, discuss market rates and ask about comparable investment properties renting out for a higher weekly amount. Incremental increases in rent are more likely to be accepted by tenants, rather than large increases in weekly rent.

3. Not maximising all deductions
Depreciation and tax breaks are essential in making sure your investment is working at full capacity. A depreciation schedule is a key ingredient in planning the pathway of depreciation. Whilst depreciation benefits for newer properties are often greater, they should not be overlooked for older properties which may feature more expensive fixtures and fittings. Obtaining a depreciation schedule which itemises all deductions is recommended, contact a qualified quantity surveyor for more information.

4. Negative gearing trap
Investing for the sake of negative gearing without awareness of other considerations can negatively impact the value of the investment property. Often negative gearing benefits wear off in the early stages of the investment and mask underlying flaws in the investment property.

5. Managing your own investment property
On face value, managing your own rental and saving a few hundred dollars can sound attractive. However, don’t discount the benefits of having an experienced professional on your side. A licensed Real Estate Agent can access tenant databases to check a prospective tenant’s rental history and also check references from previous agents the prospective tenant may have rented from. Should your rental arrangement turn sour, having a capable agent managing your situation can prove priceless. A good agent should keep you up-to-date with legislative shifts, such as safety requirements and regulations that will keep your investment compliant and ticking along as planned.

6. Taking on too much debt
Investors should be even more cautious if taking on mountains of debt, especially should interest rates increase. A quick and handy exercise is to assess your repayments at a higher rate of interest, and calculating your ability to repay debt should interest rates move up.

If you are looking at purchasing your first investment, or would like advice in the area, please don't hesitate to contact our office to arrange a meeting.

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