Property Investment Pitfalls
It is very true that property investment is the best way to get rich in this day and age. In fact property investment is necessary for most people to roll over enough money to not be working past their retirement years.
At first property investment seems very simple. You can buy the property that is below value and then get a very high mortgage rate that is covered by the money that the tenants living in your new property give you each month. You would then take that property and roll it over into the next property to repeat the process. Eventually you are able to roll millions into property investment with the ability to write off all maintenance fees and other property management.
So is this a formula for getting rich? Yes it is but there are a few things to be aware of as you are investing so you are not blindsided. First of all make sure that when you are closing the deal on your property investment that you are also including the taxes and insurance. Be aware and do your research.
Another pitfall is the inability to rent the place. This can happen for many reasons. Sometimes it is the neighbourhood or a localised recession. Sometimes it is just bad luck. In this case you can go quite a while without having income coming in to cover some costs so this can be quite difficult. Make sure that the neighbourhood that you are buying in is up and coming and has a lot to offer, facilities are handy to the property, and convenient to your prospective tenants.
Another risk of property investment is renting to messy or destructive tenants. If there are untrained pets for example, or other issues lead to the degradation of your property then you might have to pay for it all. Again, do your research and be aware. Get hold of some verbal and/or references for your prospective tenants beforehand. Speak to your agent too about the prospective tenants’ history and where there may be any concerns.
Finally, many people underestimate the amount of time it can take to truly manage a property. Be sure to have realistic expectations, do your homework and assess the time and cost involved accurately. If you are unable to handle property management with any sort of precision then be sure to get advice from a wealth management professional.