Investing in property offers the opportunity to enjoy big potential projects, just as buying your own home is one of the biggest investments you’ll ever make. However, buying property has its own set of risks.
If you’re not careful in the choices you make as a property buyer, you may risk making some costly mistakes when buying real estate:
Costly mistake #1: Becoming emotionally attached
How does playing poker have anything in common with real estate? It doesn’t, except that in both situations, there should be no emotional attachment to the outcome – to anyone who is watching you, at least!
Particularly when you’re buying your own home, it can be very easy to fall in love with a property and become so attached to the idea of living there, you’re willing to move mountains to make it happen. This can lead to costly mistakes, like paying more for a property than you can afford, or borrowing a greater amount.
Costly mistake #2: Going local when investing
First time investors tend to buy a local house from a neighbourhood where they are already familiar or comfortable. While this is not necessarily a bad thing, it can limit your options for strong future growth if you fail to look elsewhere.
When looking for good investment properties, you should follow an objective set of criteria. Is this property attractive to tenants? Is the location a prime spot that is growing in population, infrastructure and amenities? How has the suburb performed historically, in terms of capital growth? Answering such questions increases your chances of making a profitable investment.
Costly mistake #3: Lack of due diligence
Due diligence is another way of saying “do your research”. It’s essential, whether you’re buying a home or investment – and while it starts with the location and local amenities, it also includes research on the particular home.
Learning everything you can about the property can give you a better idea of what you’re in for once you move in (or for investments, rent it out). For example: do all the elements on the stove work? Does the air conditioning unit operate efficiently? Are there any maintenance issues that are raising red flags? These can be costly to fix once you own the property, so you’re much better off investigating deeply before you buy.
Costly mistake #4: Too much financial optimism
When you find the property you want, it can be tempting to try and make the numbers work regardless of how your finances actually look. If you work out that can afford a mortgage of up to $530,000, but you find a home that will give you a mortgage of $560,000, you might try to get the loan anyway. But that extra financial commitment could put you under financial stress. If the numbers don’t work, then you should not push ahead with the purchase – there are plenty more properties out there, including those that won’t add pressure to your budget.
Costly mistake #5: An unwillingness to walk away
The ability to walk away is crucial when it comes to buying real estate. If the figures don’t add up, you need to be able to walk away from the property. Similarly, if the terms are not going to be beneficial, you should walk away.
It can be a difficult call to make, especially if you’ve already invested a lot of time and effort (and even money on inspections and research) in the transaction. But committing to a property that is too expensive or somehow unsuitable can cause major headaches in the long term, so you need to review the property with a clear head and ask yourself: is it going to be in my best interests to continue with this, or would I be better off walking away?
At Think Conveyancing, we have seen first-hand the pressure that these kinds of costly mistakes can create. If you have any questions to do with your proposed property transaction, our highly experienced lawyers are available to you around the clock. For more information or to request a free quote, call us on 1300 932 738 and speak with one of our team members today.