3 mistakes that could derail your investment plans
Creating a property investment portfolio is one wealth building strategy that many people take part in. Property can be a very lucrative avenue for investment over the long term, but like any type of investment, there are certain mistakes you can make that could have drastic effects on your overall plans.
The key to being a successful investor is determining what some of these risks might be and finding out how you can avoid them through your property investment strategy.
Here are three common mistakes that investors could come across and, more importantly, ways to avoid them:
Missing a mortgage payment
If you're relying on your tenants' rent payments to fund your regular mortgage repayments, it's crucial to ensure they're making these on time and in full. This flow of income is important for many reasons – not just for paying your mortgage.
Keep in mind that missing a mortgage payment can have detrimental effects, especially if it's more than one payment you've skipped.
To stop this from happening, the first step comes down to the tenants you've got in your property. If they're unreliable and don't have a steady source of income, they're probably not going to be a good selection for your rental. When you look for tenants, make sure you run credit checks and confirm their employment or source of income.
If your tenants are keeping up with rent but you've still missed a payment, you might want to speak to a wealth coach to discuss your finances. It could be that you might need to reduce your debt or holding costs to ensure you're making your payments and growing your investment.
Getting personally tied up with your home
Your rental property isn't your home – it's an investment and you should treat it as such. Some landlords can get personally attached to their properties and this isn't a wise move.
An example is checking up on your tenants too much to see if they're treating the property right and keeping it clean. Yes, regular inspections are a smart move, but if you find yourself visiting the home on a weekly basis, it's probably going to scare your tenants off.
To keep this from happening, employ the help of a property manager to look after the inspections and day-to-day dealing of your investment.
Underestimating your costs
Managing your outgoings is a crucial part of being a successful investor. You must be prepared for all the costs that are associated with your home.
Things like refinancing fees, council taxes or even the odd maintenance or repair expense can put a big dent in your pocket – and they can also come as quite a surprise to the ill-prepared!
Make sure you've got someone keeping an eye on your finances, like a wealth coach and an accountant, to ensure you're staying on top of your costs. A wealth coach can even come up with a tailored strategy to keep you on track.