Most Australians who get involved in property investment never develop the financial freedom they were looking for according to Michael Yardney, a leading property expert and CEO of Metropole Property Strategists www.metropole.com.au.
Close to half of those who get into real estate sell up in the first 5 years, and of those still in the game, most never get past their second investment property.
However, Yardney explains some investors do very, very well and he outlines 4 common mistakes property investors make and how you can avoid them.
1. Buying the wrong property
When you ask many investors why they purchased their property they’ll say things like: it was close to where they live, where they holiday or where they want to retire.
These are all emotional reasons for buying property, and while possibly a good way to buy your home; they are not the right way to buy an investment property.
2. Not having a plan
Every property purchase should be part of a well thought out wealth creation strategy. “If you don’t have an investment plan, how can you hope to develop financial independence?” asks Yardney.
3. Not reviewing their property portfolio
While property is a long-term investment and the costs of buying and selling real estate are considerable, that doesn’t mean you should fall into the trap of not reviewing your property portfolio.
It may be time to renegotiate you mortgage or put up your rents. For some investors it may be appropriate to sell an underperforming asset.
4. Not Managing their Risk
Smart investors don’t only buy properties; they buy time by having financial buffers in place to see them through the ups and downs of the property cycle.
Another way sophisticated property investors secure their assets is to buy them in the correct ownership structures that protect their assets and legally minimize their tax. Most wealthy property investors own nothing in their own names, but control their assets through companies or trusts.