1. No due diligence
Due diligence is the examination of a property deal to ensure it stacks up and is a good investment. When investing in a property a few things you should carry out due diligence on include:
- Work that needs to be carried out
- Cost of work that needs to be carried out
- Potential rental income
- Potential capital growth
- How the area has previously performed
- Future regeneration plans for the area
2. Buying because it is cheap
This is a common mistake we see all the time. People invest in areas because they’re cheap, however, a cheap property does not necessarily mean a good investment.You can buy a house for £50,000 in some areas of the UK, however, this does not guarantee that you will achieve a good rental yield or good capital growth. We know people that have bought properties in areas simply because they’re cheap and they are now in negative equity or have seen no capital growth since they purchased.
3. Let emotion take over
When investing in a property you should not be led by emotion. Don’t just buy somewhere because you’re emotionally attached (e.g you love the garden, or it’s the area you grew up in, or because you went to university there) The whole point of investing in property is to make money. So always have this at the forefront of your mind. Ensure your decisions are based on data (the Hometrack UK house price index can be useful in deciding where to invest) and financial reasons, not your heart!
4. Unrealistic expectations
Investors often see what has happened to London property prices and think this is the case for property all across the UK. Be realistic with your expected return on investment, the quickness of your return and be realistic on the potential rental income you will be able to receive. Don’t forget that property is a long term investment.
5. No long term plan/strategy
Property is a LONG term investment; therefore, you should have a long term plan when investing in a property. Each investment decision you make should be determined by your long term strategy.
6. Not getting professional advice
Buying a property is the most expensive purchase most people will ever make in their lifetime. Therefore, any advice/guidance you get should be from experienced people. Do not be too proud to ask someone more experienced than you for help/guidance with sourcing and mortgages.
7. Choosing the wrong builder
This is especially true when buying a property in need of renovation. Choosing a bad builder can cost you time and money which will both eat into your profits. Ensure you get reviews from previous clients of the builder and ensure you get at least two quotes from different builders.
8. Lack of knowledge
Education is key when investing in any asset. Especially property! Ensure you are buying in the most tax efficient way and ensure your strategy ties in with current and future property laws and regulations.
9. Overspending on renovations
Only spend on renovations that are necessary and add value to the property/increase your rental income. When carrying out renovations, ensure you set and stick to a budget , this will stop you from overspending. It is also worth hiring a project manager if you’re inexperienced.
10. Failure to negotiate
Your offer does not need to be equivalent or higher than the asking price. The aim of property investing is to make money; therefore, you should be trying to get the best possible price when purchasing. If you don’t ask, you don’t get!
*This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published.