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Are you buying a house to flip, or to rent as an investment adventure? If so, it can be an exciting time in your life. Like any major investment, there are always some potential issues first-time property investors face, however, these can be avoided by taking some simple precautions, and this short guide will inform you how to avoid the six most common mistakes made by first-time property investors.
- Investigate Your Neighbourhood
The most critical factor when looking at a potential property for purchase is to inquire into the neighborhood. There are numerous house and land packages in Sydney, and you want to make the best choice you can. Is your potential property in a bad section of town? Is it located in a wealthy area that you cannot afford? What is the ratio of land to people; is it crowded?
You also need to think about the property from the renter’s perspective.
Does the floor plan add value to the home and is it appealing to the tenant? Are the neighbors respectful or loud and noisy? Immerse yourself in these questions as though you would be living in this area for multiple years; would you want to live here?
- Have an Inspection Performed
The next most important consideration when looking at purchasing a property is to have an inspection done on the property. By forgoing the review to save money or time, puts you at an increased risk of missing a significant and potentially costly issue with your new property.
The seller may not be aware that the foundation is sinking, but having an inspection performed by a professional individual or company will alert you to major issues with the home and save you from a disastrous purchase.
- Get an Independent Appraisal
Another mistake to avoid when buying a potential property is not to have an independent assessment performed on the home you are looking to buy. You want to know exactly how much the property is worth to know if the seller has it priced appropriately. You want to make a smart decision and spending the extra small amount of money for the appraisal can save you thousands of dollars in the end.
- Know Easement and Building Laws
An error property investors commonly make is not understanding the building laws or easement laws in the area in which they will buy.
Is the property you are looking at in a historical area? Is it in a sector where residential homes are not zoned for remodeling? By researching building as well as easement laws and other applicable and relevant laws regarding the property you are looking to purchase, you may save yourself a big headache on a property that you cannot remodel or rent out.
- Verify House Comparables
Another critical factor you need to take into account when looking at purchasing property as a new investor is to check the house comps in the area in which you are seeking to buy. You may have had an appraisal performed, and the home is worth the listing price, but if the households in the area are selling for lower than what they are worth, you are losing money on the property.
You will not be able to charge the rental price you may want due to it being unreasonable in the area. If a tenant does not rent from you, as a property investor, you are on the hook to pay the mortgage with no available income stream.
- Know Disaster Zones in Your Area
Is the property you are looking to purchase located on beachfront land? If so, you need to be knowledgeable about the local weather systems and other factors that can wreak havoc on the new property you just bought. Make sure you understand where you are buying and if flooding, storm surge, or other natural disasters could affect your property.
Make the Right Decision
Finding a property that you feel comfortable with and want to proceed with can take some time and there are many considerations to take into account. Whether the property is for purchase, for a remodel, a house flip, or as a rental, you need to know that you are making the right decision in every aspect of the process.
With our advice, you now have the knowledge to go forth and make the right decision with your first-time property investment, to finally get your foot on that coveted property ladder.