Many people choose to invest in property as a way to save for the future and gain an extra source of income. However, as well as the many success stories, like any investment, there is potential to lose money too. We’ve taken a look at the most common and costly property investment mistakes and how you can avoid them.
Some people choose to purchase an unloved property and do it up in order to let it out. However, one common mistake is spending more than the property is worth on the renovation. Many naïve investors choose to fit out their rental property with the finest fixtures and fittings possible, choosing premium furniture and spending a great deal on work. This is all well and good if there is potential for reselling it at a similar luxurious price, but it is essential that the property’s value goes up by more than the renovation cost otherwise you can end up losing money. To avoid this mistake, it is worth carrying out research, making sure you have a budget and sticking to it. Another way to purchase a property that has this high-end finish at an affordable price is to consider a new build or off-plan property.
Another common mistake is forgetting to look at the ceiling price of an area. The nicest house in the worst area will of course be limited by the ceiling price of the location, and it if you are planning on doing up and selling a property it is essential that you don’t overspend. Work out how much properties in the area are going for, factor in how much profit you want to make, and don’t spend more than that sum on renovations. You could also take a more hands-off approach and purchase a property specifically for buy to let investment purposes with guaranteed yields.
One property investment mistake that never fails to grab headlines is people being caught out in scams or investing with fraudulent companies. To avoid this costly mistake, it is worth investing with an established property investment firm like RW Invest. Do your research, check out the companies reviews and reputation and only invest if you know that everything is above board. Like with anything, if it sounds too good to be true, it might just be so. Be realistic and careful with your investment and if you have any doubts, don’t hesitate to ask questions, and carry out due diligence.
A further mistake people make when investing in property is investing more than they can afford and ending up in financial difficulties. Though a deal might seem like an amazing price, if you can’t afford it, don’t invest. You will be able to find a more affordable property or save more so you can comfortably invest in the future. To avoid this, you need to do a strict budget, taking into account all of your spending, as well as any additional fees you may have to pay, like solicitor fees and ground rent. By having a clear idea of how your finances are looking you can make sure that you won’t be stuck with anything you can’t afford. Make sure you have a financial cushion in place in case there are any issues and try and keep track of all spending.
Though it may seem like there are a lot of mistakes you can make in property investment, with the correct research, due diligence and budget, property investment can be incredibly lucrative.
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