PropHero recently held a webinar with a panel of property experts to talk through the top 10 mistakes that even the savviest investors can sometimes fall prey to and their insider tips on how to avoid these.
Here’s a quick rundown of our top 10 property investment pitfalls:
Buying in your own backyard – Most investors buy where they live, where they grew up, or where they know. We get it – buying in your comfort zone may seem appealing, but in the majority of cases, won’t be the most profitable. Our tip: Expand your horizons beyond your own backyard to increase your return on investment.
Lack of due diligence – Considering Australia’s susceptibility to natural risks, conducting thorough due diligence is an absolute must. Before investing, ensure you assess every factor that might affect the property, including bushfire risk, noise risk, flood risk, and zoning risk. Our tip: PropHero’s due diligence process is industry-leading. We test every property against hundreds of variables to ensure it is low-risk and primed for future growth.
Not taking climate change seriously – Failing to acknowledge climate change and its potential impact on properties can lead to significant risks. According to Mackay Coastal Induction research, it indicates that by 2050, approximately 5% of properties currently considered as “safe” will be affected by environmental factors. Most investors skip future predictions and focus on past trends. Our tip: don’t be like most investors. Take climate change into account and make sure the property you’re investing in does not have significant risks that could impact its performance over the long term.
Avoid regional areas with risky macro economies – Regional areas are often heavily dependent on industries such as agriculture and mining. At PropHero, we invest in suburbs with diversified economies like healthcare, technology, and finance, as these areas are better equipped to withstand economic fluctuations and minimise the risk of high vacancy rates.
Buying with your emotions – We know it’s hard, but if you’re purchasing an investment property try to detach yourself to think about the property not as a “home” but as an investment. Do you want a property that has a big leafy backyard that your dog would love running around in or do you want a property that is going to give you the best possible returns? If the property is going to be purely an investment for you think objectively and buy with data, not emotions.
Buying off-the-plan – If you’re buying off-the-plan, odds are you’re overpaying. On average, investors pay a premium of 20% to 30% more for off-the-plan properties. Also, there’s a risk that the developers or builders go bankrupt or deliver faulty properties. Our tip: instead of investing off-the-plan, consider established properties to minimise your risk.
Long-Term Cash Flow Considerations – Focusing solely on today’s cash flow is a common mistake made by investors. Property investment is (for the most part) a long-term endeavor, so make sure you focus on the long-term vs. short term when it comes to cash flows and your personal finances.
Preference for Houses over Units – Historical trends have consistently shown that houses tend to outperform units, with an average difference of 17%. This is mainly due to the abundance of units in CBD areas vs. the land availability for freestanding houses.
Don’t Skip Building and Pest Inspections – Building and pest inspections are an absolute necessity to ensure your investment property is up to scratch and avoid costly work from being needed in the future. At PropHero, we reject 1 in every 7 properties because they don’t pass our building and pest inspections. Is 1 in 7 a risk you’re willing to take?
Not working with a thorough broker or solicitor – Working with a reputable broker and solicitor will help ensure your investment is in the right hands and help grow your property wealth over time. PropHero has vetted partners across the entire property investment ecosystem that we can connect you with, send us an email to info@prophero.com.au if you’re in need of any partner recommendations.
PropHero does 99% of the work to help you invest in the best properties across the country that are low-risk and high-return. Interested? Book your free investment strategy session today!