Learn how PropHero’s clients succeed by avoiding these common mistakes
Many people dream of building wealth through real estate – creating a steady income stream, accumulating capital gains, enjoying tax perks, and generating competitive returns.
Unfortunately, a lack of time, and the complexity of the residential property market, can be major obstacles to making those dreams a reality.
PropHero is changing all of that.
We take away the guesswork, provide a powerful data-backed method for quickly finding the most promising investment properties and give you hands-on help to finance, purchase and manage your portfolio.
Based on our performance to date, our clients are beating the market’s average returns for both rental yield and capital gains. We cannot guarantee that this will continue to be the case in the future, but we can assure you that we will continue to offer the same combination of data-driven tech smarts plus human expertise to all our clients.
You can share in the same success PropHero’s clients are already having by engaging us and avoiding these common property investment pitfalls:
1. Not mapping out an investment plan before you begin
Building a property investment portfolio requires some soul searching and a solid roadmap. You need to review your finances, set your investment goals, work out timeframes and decide on how much risk you’re comfortable with.
A capital growth, rental yield, or a hybrid approach are all valid options, and knowing which one is right for you is an important step toward planning your portfolio.
As you progress, you also need to be realistic about how much time you can invest in managing and monitoring your investments.
PropHero helps you define your strategy, find and acquire high-performing properties, and enjoy passive income while you track and repeat your success – always keeping your long term goals firmly in mind.
2. Relying on gut feeling and ignoring ROI
Shares can be exciting and Crypto may be cool but they don’t pull on the heartstrings like bricks and mortar, and many investors fall into the trap of relying on gut feeling or intuition as a guide.
Truly savvy investors don’t let emotions get in the way of a more shrewd assessment of a property’s potential and its likely ROI.
3. Assuming property prices always go up
Super-low interest rates, buyer-fuelled FOMO and a shift to regional hotspots saw housing prices in many areas soar between 2020 and 2021.
But it’s wrong to assume that property prices are on a never-ending upwards path. Price drops are already being seen in Sydney in 2022, with other cities and regions expected to follow.
History shows us that price peaks and troughs come with the territory. Having access to the big picture through solid data puts you in the best position to understand property cycles and gives you a better foundation to build your investment strategy.
4. Buying in your neighbourhood (because it’s easy)
Being biased towards your own “backyard” is possibly the most common mistake of all and means you’re missing out on some true property investment gems.
Of course, we’re naturally drawn to areas where we live, work and socialise. And our knowledge of the local market is probably better (or so we think).
Yet, it‘s highly unlikely you’ll find the perfect investment property right next door. When it comes to clever investing, it pays to take the blinkers off and look into the horizon.
PropHero’s AI algorithms help clients to quickly zero in on the fast-growing suburbs most likely to meet their capital gains and rental yield goals. How they do this is to uncover properties under market value with low running costs and long term growth potential. That property could be in the next street, or in the next state.
5. Relying on backyard BBQ experts rather than data and models
Your best mate may fancy himself as a bit of an expert at predicting property hotspots. And your cousin’s wife might have made a killing in Collingwood or Coogee. Does that make them qualified to give you advice? Probably not.
Random wins and uninformed speculation aren’t the best ingredients for a sound property investment strategy. Ignore the backyard barbie experts and choose good quality data and proven investment models instead.
6. Trying to do everything yourself when you buy and manage
Crunching the numbers can be a complex and daunting task when undertaken solo. PropHero does the heavy lifting for you by using millions of data points and over 200 variables to search thousands of suburbs for properties with your preferred risk and return profile.
There’s also due diligence, price negotiation and financing to consider. And as your property portfolio grows, managing it provides an additional challenge.
Self-management is not everyone’s cup of tea and, considering the time it takes to find the right tenants, there’s a distinct opportunity cost involved.
PropHero’s extensive network of experts can take the administrative parts of property investing off your hands and leave you free to reap the rewards.
7. Failing to focus on the finance
Investors who do well approach it as a business and don’t skimp on seeking help from professionals like quality mortgage brokers.
Getting your finances right can save you time, worry and thousands of dollars in the long run. Choosing the wrong borrowing structure can derail your property investment endeavours as much as buying the wrong type of property.
8. Poor cash flow management and obsession with negative gearing
Finding properties that offer steady cash flow and strong rental yields is an ideal first step but you need to take pause and look at the big picture.
The amount of work that needs to be done on a property, the cost of insurance, council rates and upkeep will all factor into your net return. Rental vacancies will also negatively impact cash flow and the performance of a potential investment.
Also, many investors get needlessly hung up over negative gearing strategies. With negative gearing, you have a tax loss and therefore a tax benefit to shelter some of your other taxable income, but you have to fund that loss out of your own pocket to keep the property ticking over.
With positive gearing the costs of the investment are covered by the income it generates.
It’s a good idea to get the ball rolling with a proper understanding of your likely rental income and all the likely costs to model what your net rental yield is likely to be. Then consider if that works for your long term goals.
9. Buying what you like and not what a tenant will love
What you appreciate and value in a property is highly unlikely to be the same as the next person.
Renters need well-located, functional living spaces that meet their needs for the duration of a lease. As shocking as it may seem, they may not give a fig about granite benchtops or french doors.
As an investor, it pays to focus on properties that give you a solid return on your investment, rather than rejecting or renovating a property because the fixtures, fittings and features don’t appeal to your personal taste.
10. Buying the wrong property for long-term value creation
Time heals all. It’s true for love and property as well. Short-term gains are possible but you need to be in it for the long haul to have the best chance of weathering the ups and downs, and of achieving your investment goals.
At PropHero we know real estate success depends on spending time in the market and are here to help you build a portfolio over the long term. We have fixed, transparent fees and offer you all the hands-on help you need to buy, finance and manage.
Book a free investment session and learn how, even with low minimums, you can get access to some of the best property investing opportunities in the country by working with PropHero.