It can be exciting and challenging to dive into the world of property investment. With potential for significant returns, it’s tempting to jump right in. However, it’s essential to know the pitfalls and be prepared.

Here’s a guide to assist you to prevent four frequent mistakes when buying your first investment property.

1) Poor Cash Flow Management

Know the Initial Fees:

Before even inspecting properties, familiarise yourself with the initial costs related to buying. This includes stamp duty, legal fees, and inspection costs.

Expect Ongoing Expenses:

Owning a property isn’t just a one-time purchase. There are continuing costs like council rates, water bills, insurance, and potential repair costs. Putting aside a contingency fund may prevent you from financial pressure down the line.

Budgeting is Key:

A comprehensive budget will be very beneficial. It helps you identify possible financial challenges and tackle them proactively. If budgeting isn’t your strong suit, think about getting financial advice or using budgeting tools and apps.

2) Falling For Rental Guarantees

The Appeal of Guarantees:

It’s important to dig deeper into rental guarantees. Often, these guarantees are embedded in the purchase price, so you may be paying more than you want to.

Market Rate Comparison:

If the guaranteed rate is significantly higher than market rates, be cautious. When the guarantee period ends, you might not be able to find tenants at a comparable rate.

3) Risky Off-the-Plan Purchases

Potential Savings vs. Risks:

Purchasing off-the-plan might be more affordable than buying an existing property. However, it’s important to be informed of the associated risks.

A delay in construction can affect your financial plans, especially if you have to pay rent or another mortgage while you wait. Another potential issue with buying off the plan is securing financing. Before construction starts, some lenders may offer conditional approval (finance in principle) for off-the-plan purchases, but they will not provide financing until the property has been built and a valuation has been carried out.

Valuation Changes:

The property market can be unpredictable. By the time your new property is ready, its valuation may differ from your purchase price, affecting your loan-to-value ratio and potentially increasing your loan expenses.

4) Trying to Do It Alone

The process of buying a property can be daunting. From finding the right property to suit your investment goals to securing a loan that fits your requirements, the process can be challenging.

That’s where your 1st Street Mortgage Broker can help. You can rely on us to explain your borrowing capacity, create a purchasing budget, and provide professional advice regarding the right product and structure for your specific needs.

Ready to start?

If you’re ready to begin your property investment journey with confidence, reach out to your 1st Street Mortgage Broker. We’re here to guide and support you each step of the way.