The Most Common Mistakes Made by Property Investors
Many property investors are holding out to see the results of the EU referendum at the moment, but soon that will be over and done with. What’s more, shortly afterwards the prime property investment season – which usually begins with the arrival of July – is due to begin. If you are thinking of picking up a new investment property now or in the near future, then these are some of the most common mistakes to beware and avoid.
Not Thinking About Maintenance
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Maintenance costs are easy to forget or ignore, but they do have the potential to be a major drain on your returns. It is important to take account of this when planning for your investment financially. The matter of maintenance costs should also inform your choice of property. Buying an older or run-down property can make maintenance costs a burden, while buying a newer or very well-maintained property can keep these outgoings small.
Poor Location Choice
It’s not a myth; location really does matter a lot when it comes to buying a property. From a financial standpoint, this is probably more important for an investment than it would be for a home. Buying a poorly-located property may be tempting thanks to the attractive prices on offer, but it will mean your rents are lower. If this were just a matter of rents and prices being proportional, this could still be a good way to reduce your outlay and still enjoy the same kind of returns. However, properties in locations that do not appeal to tenants tend to have much longer vacancy periods as well, and this can leave you much worse off.
Looking for Quick Returns
A well-chosen property investment can be a great thing to do with your money in the medium- and long-term, but it is almost never effective as a short-term strategy. If you are looking to make a quick profit and then exit your position, then you need to either change your goals or look at other kinds of investment. If you are prepared to hold your property for a reasonable length of time, on the other hand, amassing rental income while hopefully also allowing its value to grow, then you are likely to find buy-to-let much better-suited to your needs and much more likely to prove lucrative.
The Wrong Mortgage
The wrong choice of buy-to-let mortgage can seriously hold back your returns, as your mortgage is likely to be the biggest regular expense associated with your investment. On the most basic level, yet the most common kind of mistake, choosing the wrong mortgage can mean failing to seek out the best deals and being landed with higher interest rates and bigger repayments than you had to. Choosing the wrong type of mortgage can also hold you back. Depending on your investment goals, there is likely to be a big difference in the profitability of choosing a principal and interest or interest only mortgage – though the latter type has gotten harder to find of late.