Top Property Investment Mistakes

So many people see the horror stories about investment properties on the news and they worry than property investment isn't for them. The worry that they won't be able to afford it or that the tenants won't pay the rent on time.

These things can be true if you don't get some expert advice before beginning your property investment journey. If you take some time to educate yourself about ways to maximize your profits and manage your investment property properly.

Nobody invests with the aim of losing money - so why should you?

Let's look at some common property investment mistakes and what you can do to avoid them.

1. Established Property vs. New Property

So many new investors believe that buying an older established property will be quicker and easier. They believe they'll be able to charge rent right away and they think they're doing the right thing for their property investment portfolio.

Unfortunately the stamp duty on an established property can be substantially more expensive than the stamp duty on building a new home. YOu may also find that if you buy a property that was built prior to 1985 you won't qualify for any building depreciation. Older properties may also require a lot of maintenance and repair work.

Building a new property can mean saving quite a large amount of money in stamp duty costs, which means less expense. A new property won't require constant maintenance and repairs and you'll also qualify for the building depreciation that can be massively tax effective.

2. Incorrect Financial Structure

When you buy an investment property you'll need to be sure you have your finances in order. Setting up your finances incorrectly can mean potentially losing thousands of dollars in tax benefits. Applying for the wrong type of mortgage or not knowing how to set up your loans to maximize your borrowing potential can mean limiting your investment property portfolio.

Take some time to learn about correct financial structuring and correct mortgage types for your particular investment goals and you could save yourself a lot of money.

3. Self-Managing Your Investment Properties

Of course it sounds so easy to manage your investment properties yourself. All you need to do is sign a lease and collect the rent, right?

Property management isn't quite as simple as it sounds. Conducting correct tenancy checks and making sure the tenancy agreement and associated documentation is correct and meets all the criteria required by the Residential Tenancies Act can be a time-consuming process. Making sure you engage a professional property manager means your investment property is inspected on a regular basis.

Most importantly a property manager is trained to handle problem tenants properly, which may include representing you at the Tenancies Tribunal should the need arise.

The minimal fees charged by property managers are tax deductible, so paying them should give you some peace of mind that your investment is being cared for without taking up your valuable time.

4. Inadequate Insurance

So many newer investors skimp on the amount of insurance they take out. While banks insist that you have a valid building insurance policy over the property, landlord's insurance isn't mandatory and it really should be.

Any serious investor should take steps to protect their investment property with adequate landlord's insurance. It's important to understand what inclusions your policy has and what items aren't covered before you sign, so ask plenty of questions.