First time investors often make rookie errors upon embarking on their first venture into property. Whether it be overcommitting themselves, over stretching their budget, buying a property without high demands or choosing an unprofitable location, however these are easily overcome providing you have the right guidance. Several mistakes are becoming more prevalent across the UK property industry, so here is a list of the most common mistakes that are easily avoidable.
Don’t Overstretch Yourself on Budget
Cash flow is king across any business sector, therefore the moment you stretch yourself too far with your finances, you could find yourself in boiling water.
Any property that doesn’t provide a steady income serves as no worthy investment, only a liability.
Being too hopeful and enthusiastic can often lead to misjudgement by an investor in terms of house much rental income can be achieved from a property. This will bring down your estimated cash flow and risk leaving you with a negative cash flow property.
Outlining a Strategy or Financial Model
Often, many first-time investors fail to outline a strategy before embarking on any finalised investment deals. Performing a financial analysis on a deal can highlight whether the property is suited to you and allows investors to make astute decisions based on their desired goals.
Property investment companies like RW Invest aim to make the journey through property investment as smooth as possible, attentive sales negotiators are on hand to ensure all your questions are answered from start to finish. Focussing on key investment hotspots throughout the UK, RW Invest focus on key investment hotspots throughout the UK to assure high rental income and excellent opportunity for capital appreciation. In the meantime, it is important for you to focus on your own individual goals and strategise how they can be implemented to guarantee the best investments.
Financial modelling can include budgeting the costs of a development project against the expected income from the sale or rent of the completed dwelling, budgeting the expected rental income after all expenses such as management fees or water rates, determining the return on investment so it can be used as a comparison against other asset classes like stocks and shares and also helping to establish an estimated market value of the property after construction is completed or renovated based on the market currently and over the past 6 months.
Research is Key
It can be easy for individuals to get tricked by the promises for quick profit and enter the property investment industry with little necessary knowledge on what can be deemed as a prosperous opportunity.
The solution is to read around your topic, perform as much research as possible.
There is no excuse to be underprepared.
Not Balancing Risk and Return
Of course, like all types of investment there is always a small risk element. If an investment is sure to offer desirable returns, also analyse its risk profile and calculate how much money you should expect to lose if things turn upside down. Therefore, is it imperative you should never bite off more than you can chew, in other words, don’t invest more than you can afford to lose.
Performing Due Diligence
Quite often the novelty and excitement of purchasing a new property and becoming a property investor can quite often cloud the judgement of first time investors, leading them to skim over the business side of property investment and causing a buy that may prove to be an investment not worth their while.
Due diligence for an experienced property investor can include a multiple of factors such as testing the build to ensure it is structurally sound and safe for tenants, make sure the property fits in your overall vision of the portfolio you’ve imagined, carrying out research and understanding of the current trends surrounding the local property market to ensure you thoroughly understand sale prices as well as typical rental incomes, and finally performing comparable research to justify whether your potential property is a worthwhile investment.
Never make assumptions about the location or property, and do not act on the premise that markets are always efficient producing good returns all the time. Of course, every other investor has access to the same information as you, however it is up to you how you utilise it and how you can use it to your advantage to identify unmissable investments.