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Purchasing an investment property is unique and unlike any other property purchase. By taking the time to understand the nature of the product and the purpose it serves, first-time investors can put themselves in the right mindset, and as a result, make better decisions. Here are eight mistakes that first-time investors make when buying an investment property.

  1. They Judge the House Based on Their Own Taste and Criteria

Buying an investment property and purchasing a property to live in are two entirely different disciplines. The latter comes with a number of emotional requirements; most people have a shopping list of “must haves” and “should haves” before attending open homes.

An investment property is a mathematical equation, designed to yield long-term financial benefit. Things that are crucial to a home buyer, such as the view, the interior design and even the location may not serve the investor well. For example, just because an investor wouldn’t live in a particular area, or requires an open plan living area, doesn’t mean that plenty of tenants, or future buyers, wouldn’t love to live there. By definition, homebuying is incredibly personal, and by removing the individualistic element and replacing it with numbers and measurements, better investment decisions can be made.

  1. They follow rules…

Rules are useful; they form the basis of our society and help us understand the reasons things work the way they do. Likewise, in property investment, having rules is useful. Investors use basic criteria to make good decisions on potential purchases and exclude those that aren’t suitable. Researching the cost to equity ratio, average rent and average sale price across certain areas for example. This formula form the basis of purchase rules for astute investors.

Then there are the other rules.

“Buy the worst house on the best street.”

“Only purchase near a school.”

“Never buy weatherboard.”

The list is endless and sometimes correct. However, just because a weatherboard house proved to be a bad investment for a family member or friend, doesn’t mean the next potential investment property you see is a lousy investment. Millions of people live in weatherboard homes, far away from schools and in houses that are not the worst and on streets that are not the best.

  1. They Don’t Buy Anything

Most investors never advance beyond one or two properties, and the statistics as to how many investors never even purchased one are unavailable. However, there can be little doubt that the biggest challenge facing aspiring investors is the courage to make a decision. Leaping into that first property will feel terrifying and exciting (this lets you know it’s worth it) but the only one who can make the final decision is you. Having the courage to buy the first property, and the second and plan for more is one of the critical actions that separates a good investor from a career investor. After a few times, the act of purchasing a property, or selling one, is just something you do for a living.

 

Rookie investors who don’t succeed usually fail because they haven’t taken the time to learn the difference between a regular property transaction and an investment property purchase. The mindset, including the way to evaluate the property, is markedly different. The trick, of course, is to educate yourself enough that you are not a rookie.

Dream Design Property (DDP) is a unique wealth creation mentoring program that is designed to help Australians gain financial freedom, offering each client an ongoing personalised service catering to their changing circumstances and needs. DDP has helped purchase over 1,000 properties for its clients.

For more information please visit //www.ddpproperty.com.au/contact.html

 

Zaki Ameer | Founder | DDP Property

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