For decades, investing in property has consistently remained a constant means of creating long term wealth. However, as promising as property investing might be, there are also pitfalls investors encounter if not done properly.
As a property investor, I come across different people whose property investments yields unpleasant results due to avoidable mistakes. Property investing pitfalls can cause serious issues for an investor and may take several years to recover. As a result, the importance of learning from the mistakes made by others cannot be overemphasized.
Here are four common property investing pitfalls and how you can overcome them in order to ensure success.
1. Emotions over Evidence
Generally, people invest in property when they hear it’s a good time to buy, see a place to call home and raise a family or invest with the notion of prices always rising as long as you hold for long term. Investing this way is based on personal feeling, emotions and sentiments.
In overcoming emotional pitfall, property investing should be done based on due diligence, facts and figures. You need to ensure the property is in the good location to attract quality tenants, provide the required return on investment, and sustain its price over a long term. Investing this way is based on gathering evidence for financial gains.
2. Capital Gains over Cash Flow
I find out some investors focus on holding properties with the speculation of capital gains, believing property prices double every 7 to 10 years. Investing this way, if not done properly, is a high risk strategy as I mentioned in my previous blog http://ow.ly/XzNc30j4wG8
In overcoming capital gains pitfall, I believe your property investing strategy should focus on getting regular consistent rental income – cash flow. An additional bonus would then be for the property to be in a location with potential for capital gains. Investing this way ensures you are covered for unexpected expenses and can build up cash reserve for more investment.
3. Self-managing over Leveraging
For most investors I come across, the aim of investing is to have more personal time, build a profitable portfolio and create wealth. However, I find investors self-managing their portfolio, collecting rent and dealing with maintenance issues believing the savings made from outsourcing these tasks would give them more profit. Investing this way can easily become a full time job.
In overcoming self-management pitfall, you should focus on leveraging other professionals and using systems to handle all of these things on your behalf. Investing this way would ensure you get the best outcome and also give you more personal time to enjoy a lifestyle you desire.
4. Entry over Exit
The exit of a property investment is equally as important as the entry. However, a lot of investors referred to as “accidental landlords” enter into a property investing with no clear exit strategy. Investing this way exposes investors with no clear investment goals.
To overcome this pitfall, you should focus on a clear strategy for your property investing which states an entry, holding and exit strategy. Investing this way helps to achieve your goals using a well laid out process.
In summary, investing in property is likely the largest single purchase you will make, as such, it is worth spending time to do due diligence on your investment, be aware of the possible pitfalls and how to overcome them to ensure success.
If you find something interesting, have any questions or would like to invest and ensure you overcome these pitfalls, contact us and I will be more than happy to help.
Regards,
Emmanuel Adedipe | achieving more together
