Propertyscouts Invercargill

Property Investment - Top 10 mistakes Kiwi property investors make - 14th Sep 2015

Property Investors should read this article you will find it very interesting.

To read the whole story follow this link and it will take you to the Stuff.co.nz website.

To give you a summary of the article, the things to be aware of with property investing are

Believing property investment will solve all your financial problems

"Just because you own property, it doesn't mean you will automatically be wealthy and be able to retire comfortably."

She said it was important not to expect to be able to make a lot of money overnight by doing nothing.

"People get caught up in how much money they can make and don't realise the amount of work you have to put in."

Not doing the numbers

"They don't think about what the cashflow will be, what the deal will do for their financial positions, whether it will be positive or negative, or what other costs will be included."

Not understanding the risks

"Most can be minimised but you have to know what they are."

Not getting advice

Property investors can avoid mistakes by learning from those who have already seen others make them.

Dudson said all property investors should have an accountant with experience in property investment, a property mentor or a financial adviser to talk to.

Local property investors associations can be help.

Dudson said it was important to have a plan and review it regularly.

"I see people cross their fingers and hope everything will be fine. You need to be constantly looking at what you are doing and why."

Whitburn said those who were getting started should talk to a lawyer and accountant to get the right ownership structure in place.

He said many people bought properties in trusts when they did not need to, or had look-through companies when they should have bought as a partnership.

"Trusts are great for asset protection but bad for tax efficiency. If the property is making losses, they get stuck there"

Thinking finance is just about getting a loan

Many people did not think about how they structured their mortgages, whether they should be principal and interest, interest only, or revolving credit.

She said a mortgage broker with property investment advice would help.

Not managing the property well

Dudson said few investors were capable of managing their own properties.

Many would end up not putting rents up often enough or not knowing how to deal with problem tenants.

"You hear 'they're such a nice person...' but then the tenant doesn't pay, you get caught and before you know it you're $3000 in arrears."

Whitburn said investors should ensure they had enough money aside to cover repairs and maintenance, and keep on top of it.

"Don't skimp because you end up with worse tenants and it leaves you losing money and time, it costs more in the long run."

Not doing due diligence

Whitburn has seen investors buy leaky buildings, paying full market price, or buy leasehold properties not understanding the terms of the lease.

Only being interested when the market is hot

A lot of people decide to become property investors when house prices are rising.

Dudson said that was the wrong approach to take.

"In reality, you should have been buying three or four years ago. When it is doom and gloom, that is when you should be buying."

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