Investing in property is a hugely enticing and exciting idea for a number of Kiwis. However, regardless of whether you are a first-time investor looking to take climb onto the ladder or a seasoned pro looking to grow your portfolio, there are a few common mistakes that can trip people up.
In order to put yourself in the best position to succeed, watch out for the following traps. Because failure to notice and adjust to them could result in a few tough decisions or situations in the future.
The Kiwi dream idea
The great Kiwi dream of owning your own little slice of paradise is something that is deeply entrenched in our DNA. While this is something to aspire to, don’t let it drive you into an investment that isn’t right.
Whether it is owning your dream family home, that you can envision raising a family in and getting old in or a batch in the Coromandel, pushing hard to achieve this may cause you to make a decision that isn’t financially viable or smart in the long run.
Getting emotionally attached
It can be very easy to get emotionally invested in a house you are keen on. It may be the feel, maybe it’s the location, or even the Kiwi dream kicking in. But, if you get to a point where your emotions are starting to over-shadow your buying strategy, consider taking a step back.
Start by seeking advice from a trusted source, such as a mortgage broker, accountant or lawyer. Seeking outside counsel will provide you with an unbiased opinion about whether or not the investment is viable.
Listening to the media
Nowadays, we have access to countless sources of information about the property market and it seems like the marketing is changing direction every few weeks. However, listening to media reports, and thinking you may miss out, is one of the biggest mistakes an investor can make.
To avoid this, it is important you take your time to do your own research, speak to trusted advisers and understand the market. Don’t let the noise generated by the media force you into acting too soon, remember there will always be another opportunity.
With New Zealand’s competitive property market, it is not uncommon for investors to overpay for a property just so they can get in the market.
Regardless of how you submit an offer, make sure your budget and strategy have enough leeway for you to offer a little bit more than you hoped. Overpaying and borrowing more than you budgeted for may seem feasible at the time, however, you may find it could drastically harm your financial wellbeing in the future.
Remember, buying a house is a massive financial commitment. So if you’re budget doesn’t allow for an increase of 5-10%, be prepared to walk away.
Trying to time the market
The property market is notoriously unpredictable and hard to read, especially if you are inexperienced in the market. While the market may currently be experiencing a downturn, remember it could swing into a holding or even a growth period with little notice.
Instead of trying to play the market, make sure you have a solid understanding of long-term market trends, as this will put you in a better position to strike when the time is right.
A good idea is to have a good grasp of the history of the suburbs or areas you are interested in buying. Take into account, its recent growth, the development of the area and pricing increase over time.
Taking too long
While rushing into a purchase your not ready for is not recommended, waiting too long can be just as bad.
It is always a good idea to take your time, do some window shopping and find the property and financial commitment that is right for you and your family. But, when you find that option don’t let it slip.
There is nothing worse than finding the ideal investment and waiting until the last moment to submit an offer, to find out someone has already snapped it up. If you have found the property, have secured pre-approval and your budget allows, submit your offer.
Entering into the property market is never easy and it is made harder if you don’t do your due diligence or make rash decisions. There may never be an ideal time to enter the market but if you have a solid plan in place and you believe it’ll work, then take the leap.
If you are currently investigating the property market and looking to buy a house, but need help or advise on what your next step should be, we would love to help. Contact us today and we can help you design a plan of attack.
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