Buying investment property is very different from buying a house for your own living. It has greater risks. You have to select the right property, arrange the financing or refinance your existing home, and then very important making sure the rental income is adequate to pay off the loan in the long term as well as having a good capital growth potential. The process is not quite as straightforward as buying you owner occupied home. First-time property investment or property buyers, in fact, have a tough time finding the right property with a good mix of income potential and capital growth. Put it simply because you don’t know what and where to look for in the first place, and the greatest mistake you can possibly make is getting too attached to the suburb you are living in! Furthermore, you may also be lured or dazzled by vague real estate offering, colourful listings in magazine and may eventually bought into an unsuitable investment property as you could be easily be misled into believing it as a good investment.
Buying into the wrong investment property has huge loss implication when things turn against you. After all, you may have spent up your entire life saving to buy your dream investment and the last thing you wish for is being wrong. Some real estate investment agencies do tend to use dazzling literature and obscure terms to sell their properties. This is may not be entirely ethical but its not illegal either. As a buyer, you should know exactly what you are getting into, don’t be be swayed by such literature and sales tactics. When it’s too good to be true, get a second opinion.
Here is how we can assist, we do not want you to part with your hard earned money. So, we have create a short guide as below. Just remember it’s all in the numbers, profit is made at buying, it’s is only being realised when you sell.
Here are some tips on pitfalls to avoid
Blah, Blah, Blah
Unnecessary information is the most common way by which real estate companies try to frazzle real estate buyers. You will be told unnecessary or common details, attractive features, a lower-than-market rate, and so on. Most of these features are usually already offered by all real estate companies but an unethical company will try to hype themselves as the ‘only’ company offering these features for unsuspecting investors. In this case, don’t be afraid to get all this in writing. Ask as many questions as you want and try to get concrete or clear answers. Remember, its your money that you will be spending on the property and you have every right to get clear answers. If you do not get exact answers or prompt clarifications, just move on to the next. Remember to factor in insurance, depreciation, deductions and misc cost in your calculations. You are the one that is really in control.
Real Estate Property Requires Very Little Investment: Low Down Payment
Real estate companies may try to lure you into investing in real estate by pitching first time investments with low downpayment. Technically, this is not possible unless the agent or the company has studied the buyer, his investment potential, the market he is interested in and many other such factors. Moreover, market rates tend to vary daily and promising an initial investment for a fixed amount is unethical. Advertising pitches like these are a way to catch people’s attention and bring them in to the office so that other products or investment options can also be sold.
Only So-And-So Area Is Good For Investment
This is the most common pitch that you will hear. The company or agent will tell you, ‘ Sydney/ Queensland/ Melbourne… are happening right now and its time to snap up properties in these cities.’ This is not correct or right. Every city will have its own property rates, amenities and features. Instead of following the salesperson’s pitch, just inquire about the capital growth of a particular city or location over the last 20 years. Any area showing a slow but steady increase should be shortlisted for investment or for first-time buying.
Only Invest in NRAS stock. Its Really Doubling in Value
No doubt NRAS stock is great and it is increasing in value. But it is not the only investment option out there. Most real estate companies are pitching this to buyers as they feel as it is a simple and affordable investment option but don’t restrict yourself to this market alone. NRAS does offer significant tax benefits but they do have other negative features as well. If you are interested in NRAS, then ask the agent or company to tell you the pros and cons before investment. Invest in the stock only if you feel it is the right investment for your particular situation.
Secondhand Properties Are No Different From First-hand Properties
This statement is untrue. There are distinct advantages to buying first hand properties and other advantages to investing in second hand properties. Before buying, you have to be informed about everything. For example, new properties are purchased directly from the builder and will have minimal maintenance requirements. On the other hand, secondhand properties may require refurbishment, repairs, renovation, etc. which will expensive and time-consuming as well. Make an informed decision only after investigating the new/old property completely.
Anybody Can Invest
Yes, anybody can invest in real estate but you should not invest without doing substantial research. There are one thousand and one things that can go wrong if you jump into real estate investment without reading up in detail or if you can afford the mortgage. In short; do your research, then pony up with the money.
So-And-So Area Is The Next Best Market…
How does anyone predict the future? Yes, real estate gurus do study the market and they do predict that some areas will do better than others but this is just a prediction. It may or may not work. Some areas take decades to develop completely and it may be a long, long….long time before you actually see any return on your investment. Instead of relying on market predictions, just do your research properly and pick a property that suits your particular investment requirements.
Mining Areas Are Booming Right Now…
They might be, but a mining city might not be the right investment area for you. As an investor, you should be told the pros and cons of investing in a mining town or a property close to a mine. Be warned that properties may seem lucrative but they might not suit your particular requirements.
You Will Get a Rental Guarantee With Us
Now, that is surprising. What is the need for a rental guarantee from the real estate company? Will the property not rent by itself? In that case, there must be something wrong with the area, the property, or the company itself. Do not go by rental guarantees. Before you buy the property, check local rental rates, rental vacancy requirements, finance rate.
We’ve Pre-Selected Properties For You
Why? If you are the buyer, and you are meeting the company for the first time, pre-selecting properties makes no sense. After discussion, the real estate company should match your requirements with real estate properties and then come up with a list of properties for you to choose from. Pre-selection may mean that the company only has those many properties for sale or they may be dealing only with a select group of builders or sellers. This is not a favorable condition for a investor at all.
Most of these sales tactics are commonly employed by real estate agents and they can be quite effective. Buyers are lured into purchasing property that is well above their budget and this can be tough on the buyer. But we want to you to be prepared and this is the reason why we urge you to listen carefully while the agent or company is talking, ask repeated questions, and get everything in writing. Remember, if it sounds too good to be true, its usually a fake or a scam. Move on or find another agent/company to help you out.
If there are any questions you would like to ask about what we’ve written or if you would like to look for investment properties with us, please do write in to us and we will be glad to help you out. We just want to make sure that you work with a honest, ethical and impartial real estate company like us who will help you find exactly what you are looking for.