Investing in a property or real estate in general can be very rewarding but without proper homework and the guidance and advice from your YFG lending specialist - it can be a huge disappointment.
It all boils down to how much money you would eventually make to justify the investment. Also, should you choose to use an investment property as a rental or for other purposes to make money then you need to factor in the convenience of running such a venture.
As is the case with any investment or in any business, first timers would be prone to make a few mistakes that veterans wouldn’t. It is not that veterans in a niche don’t make mistakes but amateurs are more vulnerable.
To help you in your quest, here are the common mistakes first timers make while investing in a property. (But as a beginner in property investment, we suggest that you always speak to your YFG lending specialist who can guide you along!)
- Nothing but the math matters. You may be tempted to invest in a property because you have fallen in love with it, you may be encouraged by people you know and you may even be driven by what others are doing or you may want to be in the same league. Nothing can be as disastrous if the numbers don’t make sense. The quantum of investment, the financial obligations to turn things around and the eventual returns are the most important realities; everything else is secondary.
- The only emotion that matters are of the tenants, tourists or homebuyers, whoever you are targeting. Your emotions don’t matter at all. Since you would be investing in the property and not staying in it. Don’t judge it from the perspective of your preferences. Don’t presume that tenants, tourists or homebuyers would like what you are fond of. Take a very pragmatic view and question yourself if the property would attend to the convenience, senses and financial jurisprudence of the tenants, tourists or homebuyers.
- Don’t buy the hoopla about skyrocketing property appreciation. Don’t buy the archaic sales pitch that properties will always be subjected to appreciation. The value of your property will only increase reasonably, unless you have purchased a piece of real estate close to the boulevard in Vegas before it existed or in Atlantic City as it was being conceptualized. Only in such cases the property prices would shoot through the roof and perhaps hit the moon. In every other case, there would be substantial property depreciation and that would eat away a part of appreciation or inflation.
- The down payment or the upfront costs are not the only investment, neither is the total cost of the property. There will be additional costs, from fees for the various professionals involved in the deal to decking up the property and marketing it later to generate the returns.
