For the ambitious among you who have decided to invest in property, it is highly likely that you are dreaming of the day when you can retire early and live off the returns of your shrewdly crafted property portfolio. After all, you didn’t choose to buy property for the fun of it – everyone who makes the decision to buy multiple properties wholeheartedly believes that they are making wise and ultimately fruitful investment decisions.
Once you have multiple properties in your portfolio, you will begin to notice growing commitments and pressures. This is where property portfolio management software and experienced experts can step in to facilitate the process of developing a solid and profitable property portfolio and to warn you of dangerous pitfalls. Listed below are some of the most common mistakes property investors make that stand to cost them dearly in terms of time, effort and money.
They become overly confident
A certain degree of self-assuredness is certainly crucial when it comes to making important financial decisions, but investors should avoid becoming overly arrogant. If you have been advised against buying a particular property, take this suggestion into account and do your research. Just because you have had success in the past, this does not mean that you are infallible or that you have the innate ability to turn a profit on even the most hopelessly dilapidated house. It is important to know your limitations and to work with them to your advantage.
They pick the wrong properties
Buying property as an investment is markedly different to buying a house for you and your family to enjoy. This shift in perspective can be difficult to get used to, but it is necessary in order for investors to make the right decisions. Properties need to be viewed from the perspective of a landlord, rather than an owner.
Question whether the given property will be appealing to potential renters, whether it has access to useful travel links and whether there are local amenities. These types of properties will inevitably lead to higher rent rates, so careful consideration needs to be made with regards to type and location of property. Investopedia recommends that you ask the following relevant property questions: Why is the owner selling? What needs replacing and/or fixing in the house? Is the property in a flood zone? Are there termite problems, or other pest issues? Are there any problem areas nearby?
They don’t do their research
James Baxter of Tideway Investment Partners points out the fact that serious property investment demands an equally serious amount of quality research. Not only does this mean asking important questions, it means opening a few books and doing your homework on property investment so you actually know what the important questions are. You can never be too informed on the area of property. Be aware of the risks, rewards, financial demands and legal requirements you need to adhere to. Never simply believe the assertion that property is always a wise investment. There is always a risk involved, nothing is entirely safe and only a well-informed investor will be able to separate the wheat from the chaff.
They don’t account for emergencies
Property isn’t a predictable market. Wise investors always have an emergency fund allocated in the event that a problem should arise. If the boiler in one of your houses breaks, you want to be able to fix it as quickly as possible to avoid the prospect of angry tenants. To prevent this from happening, use the rent you receive and set aside a percentage each month, which you keep in a separate account.
They lack focus and direction
If you want to have a serious property portfolio that works for you, it is important that you take the time to put together a future plan detailing your aims and aspirations. According to Atlanta-based investor Andy Heller, lack of planning is the number one error made by new investors. After all, as Benjamin Franklin (possibly) said, “If you fail to plan, you are planning to fail”. Don’t buy a property without first knowing what you are going to do with it; have the house fit your plan, not the other way around.
They have unrealistic expectations
Some people turn to property investment with the expectation that it will be the answer to all their financial woes. It is important to remember at all times that property investment is a difficult undertaking. A lot of time and effort goes into the upkeep and finance. You shouldn’t expect to make money instantly – it will take a while, given you’ve made sound financial decisions, but property investment certainly isn’t an easy get-rich-quick scheme.
They’re not using property portfolio management software to their advantage
In this day and age, technology and software have advanced to the degree that they can take a lot of the stress and strain out of everyday jobs. This is certainly true for those in the property investment business. Consider the amount of daily responsibilities the average property investor has to deal with; they have to keep on top of gas and electricity safety certificate renewal dates, track rent income and remain financially compliant. This is part of the reason why property professionals have the highest stress levels in the UK job market.
Appropriate property management software can save you time and effort with accurate and efficient accounting functionalities, data tracking and management, document creation and administrative automation. It can even be customised to fit your needs specifically. With such remarkable software at hand, it seems ridiculous to slave away when there is simply no need.
About the author:
Yaakov Smith is an entrepreneur who is passionate about providing creative solutions to everyday business issues. He is the owner and founding manager of Logican Solutions Ltd, which offers a range of industry specific products, including claims management, debt management and property portfolio management.
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