First-time property investment and home buying can be an overwhelming endeavour to say the least. Making such a major purchase and investiture of your time and money is challenging and there are many mistakes that can easily be made in the process.
You certainly don’t want to fall victim to the market and end up losing money. If you want your first property flip to be a success and hopefully continue to do well in the real estate game, avoid these common mistakes like you would avoid buying a run-down shack in Humpty Doo, Australia.
While home may be where the heart is, your wallet should be where your brain is. Thinking critically and using logic when making your first property buy is absolutely necessary.
Investment properties should always be bought by doing market research, not because you think your kid would like the swimming pool. A mindset for financial gain will win every time over emotional impulse when trying to flip real estate.
Your first purchase should be geared towards return on investment and nothing else. If you plan on renting the property out, for example, consider factors such as: what kind of occupants do I want and does this location provide them?
Underestimating the costs
There are many costs apart from the sale price of your home that need to be considered before making your first purchase. If you fail to take these extra costs into account, you can be sure that you will spend well over your budget.
Some calculations to factor into your budget:
• Realtor commissions
• Moving costs
• Property taxes
• Maintenance fees
• Insurance payments
Another thing to keep in mind is whether or not you will be using any loans to help cover your expenses. If so, it’s important to be informed of things you should consider when looking for a personal loan.
Not buying for the market
This ties in with the earlier point about thinking logically and doing research beforehand. If you don’t know the market, the chances of you buying the wrong property increase substantially.
What does buying the wrong property mean?
It means purchasing a property that won’t sell according to your area’s demographics. For example, if you’re looking to make a purchase in a suburb that primarily brings in families, you don’t want to invest in a bachelor’s pad.
Buy according to your market and avoid being stuck with a large family home in an area full of hipsters in condos.
Neglecting to perform a property inspection could probably be paired with underestimating costs but really deserves its own heading. One of the silliest things a first-time home buyer can do is fail to have it properly inspected by a professional.
Inspections and appraisals are two entirely different matters and you should be aware of this fact. Having an inspection performed can actually allow you to negotiate a lower price on the home if anything such as sloping floors, poor insulation or faulty plumbing should be discovered.
Many first-time property investors fail to see success because of simple mistakes that are easily avoided. Don’t give in to emotional buys, make sure you are factoring all costs into your budget, do the necessary market research and opt for a professional inspection to make sure your property brings you significant returns.