9 Mistakes Investors Make in Building a Property Portfolio
Many articles and videos online make it seem like investing is just a "piece of cake" or a "walk in the park." The truth is, investing your hard-earned money is much more than this, and if you genuinely want to succeed in this type of business and industry, you have to make sure that the risks you are taking are calculated and that the decisions you are making are the right ones.
Today, I will be sharing with you nine mistakes investors make in building a property portfolio and how you can make it right.
9: Treating investing in property as a “hobby."
Most people love buying properties because they have fun renovating them and purchasing new items for these properties. In short, they are treating property investing as a hobby and not looking at it as a serious business.
If you genuinely want to make it in this industry, you need to let go of your "I'm doing this for the fun of it" mindset and unleash your business mindset. You have to remember that investing in property is not merely a one-time event. Instead, it is a long-term process that would need your serious commitment.
8: Diving into the business unprepared
“If you enter a battle unprepared, get ready to lose.” It applies not only to war but to our everyday life, and business is one of them. If you want to become a property investor, you need to make severe considerations and understand that diving into the business requires a lot of careful planning.
Most people who fail do things on impulse, like easily giving in to marketers' promises without planning things first or buying a property close to where they reside because, for them, staying in their comfort zone is much better than exploring new territories. Do not make the same mistake that most investors do - do not buy a property in your backyard. Studies have shown that investors who decided to buy a property within the vicinity of their residence bought underperforming properties and could not get a price advantage upon their purchase.
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7: Using the wrong strategy
Using the wrong strategy is just as bad as having no strategy at all. Remember that Real Estate is a long-term, high-growth, and low-yield investment. The strategy you must opt for should be to use your property portfolio's capital growth in growing a considerable asset base, which would give you more options in the years to come. Investing in property is something that you should think about thoroughly because if you don’t, you are up for a colossal disaster!
6: Changing their minds too often
When there is market movement, some investors get spooked easily and change their strategies instead of sticking to one proven to help secure their investments and wealth creation through capital growth. Remember to stick with "already proven" rather than going for "can work for now."
5: Setting unrealistic goals and expectations
Most property investors fail because they set goals that are too unrealistic, and they are in a hurry to finish the process and get their gains. There is no such thing as an overnight success, and diving into property investment will not give you quick returns.
Investing in any property is not a "get rich quick" scheme. Instead, it is a "get rich slowly" process, and like all processes, it takes time. It even takes some investors 30 years before they can grow an asset big enough to support their retirement. It takes years and a lot of stages and processes before you reach the top of the ladder. If you think you cannot wait for 30 years before gaining returns, you must consider again before deciding to invest in properties.
4: Being overconfident.
The market is unpredictable, and it can rise and fall in an instant. Just because your first investment has recorded rapid capital growth does not mean that your next investment would result in the same. Remember that the rising market has a significant impact on the value of your properties. Once you buy the wrong type of property during the market's peak, then you cannot expect your second property to be as valuable and perform as strong as your first one did.
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3: Overlooking the importance of “location."
You have to remember that not all locations are created equal and that many factors depend on the site, which would result in your success or your regrets. Remember that one of the most significant capital growth drivers is the strong demand in an area and the scarcity of accommodation in aspirational suburbs close to the CBD with great public transportation, excellent amenities, and various lifestyle drivers. In short, these locations are the ones where the residents have a higher disposable income and are prepared to spend more to live there.
2: Not owning the right properties.
You may have the perfect location, but you may have a problem if the properties you have are not “investment grade." A property is considered to be investment grade if it:
Has an owner-occupier appeal
Has a high land to asset ratio
Has something extraordinary or unique about it
Is scarce in supply
Is attractive to banks (this is important because banks will lend to properties they think is attractive)
Has the potential to add value shortly
1: Doing it by yourself.
Finally, one of the commonly committed mistakes of first-time property investors is doing it by themselves. Investing in property is not a walk in the park, and you will need all the help you can get. Of course, do not ask for help from anyone else, but from those who are considered experts in the industry. Studying it on your own is good but working with expert investors is better. You can learn a lot of things from their years of experience that you will not learn from books and Youtube videos.
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