Juliet Risdon
Juliet Risdon is a Director of JML Property and a property investor.
Having established the company in 1994, JML Property offers Investment Property & Homes. It specializes in managing properties for owners and investors, and providing attractive and comfortable homes for tenants.
Investing in property has many advantages, but there are plenty of traps for the inexperienced buyer.
There are many ways that a property investment can go wrong, and of course it is important to be aware of the potential pitfalls.
This article is split into four parts, each of them with costly mistakes that we have witnessed investors make so that you can recognize and avoid them yourself in future.
20. Lack of Planning
It is vital to sit down and plan out the key factors in your property investment. A failure to do so can lead to a financial disaster that may be difficult to recover from.
If you are able to set out clear goals and then strategies to achieve those goals, you will have a measure as you move forward with your investments. You may want to consider your budget, how much money you will borrow from the bank, what happens if the property is empty etc.
19. Not using a Property Company that specializes in investment property.
If you are buying an investment property, it’s a mistake to rely on an agency that only deals with homes.
At first sight, many agencies and property companies look the same. However, you will want to ask about rental rates, vacancy rates, return on investment, growth predictions and so on. These are all issues that a regular agency will not be able to answer accurately, and at worst may give mis-leading information.
Most importantly, asking for some previous examples of successful investment properties should give you some ideas, whilst getting a clear picture of where NOT to invest may just save you a lot of money.
18. Not having enough financial reserves for the property
When you find a great property, its easy to get carried away and pay a deposit to ‘hold’ the property whilst you establish your finances.
If you have already managed to plan accordingly, you will know how much you can and cannot afford to pay for a property. As simple as it sounds, make sure you have enough ready cash available to complete the purchase.
If you own funds, stocks or other properties, you have wealth on paper. But having cash in the bank may take some time, especially if you have to liquidate other investments.
You don’t want get caught ‘short’ of cash, and have to borrow more money from the bank or friends. There have been plenty of investors who have lost deposits when they have been unable to raise sufficient cash in time.
17. Ignoring the ‘associated’ costs
When you buy a property, there are always costs involved.
There is an escalating ‘Stamp duty’ both on the property price and the amount of the loan, and is as much as 3 percent of the sales price.
There are lawyers fees to cover, and this may involve a translation fee as well as professional fees. There are notary fees to cover. The bank may charge a loan arrangement fee. There are government registration fees, and fees for documents.
The fees will normally add up to around 5 percent of the property price, and it pays to put these in a budget. We use a ‘property evaluator’ to estimate the associated costs of each property and make sure the buyer has an idea of what to expect.
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