5 fears of property investment and how to overcome them
Halloween is traditionally the scariest night of the year, but don’t let investing in property add to the fear factor!
Here we take a look at five fears people have of investing in property and suggest ways to overcome them.
1. Financial commitment and risk
- Fear: One of the biggest fears related to property investment is committing to relatively large upfront costs and the possibility of losing money.
- Overcoming the Fear: Speak to a financial specialist so you fully understand what the risks are, and can budget to your financial situation. Develop a thorough budget and financial plan and factor in the risk by having a buffer for unexpected expenses.
2. Market volatility
- Fear: The real estate market can be unpredictable, and property values do fluctuate; this can be off-putting for those who fear a downturn in the market.
- Overcoming the fear: Whether it’s shares or property, just about any investment involves the risk of a volatile market. Get your mindset right for being an investor, and remember property is a long-term investment strategy. Educate yourself about market trends and cycles so you can time your sale when prices are high. Thoroughly research neighbourhoods and the factors that influence property values.
3. Buying the wrong property
- Fear: What makes a good investment property? Is the location right? What do tenants want? Is there a better property elsewhere? This fear is common in both new, and seasoned investors.
- Overcoming the Fear: Do your homework and of what makes a property attractive to tenants, and what type of tenants a property is likely to attract. Research locations and have ‘check list’ for when you start looking for properties. Then come and speak to us – we’ll tell you what to consider, and give you an honest opinion as to whether it will make a good investment property or not!
4. Change in financial situation
- Fear: A reduction in hours or a job loss, while having financial commitments is a huge fear for many.
- Overcoming the Fear: The golden rule here is don’t stretch yourself and plan for ‘worst case scenario’. Make sure you stick to your purchasing budget, no matter how perfect the property seems. For each property, look at income (from rent) vs expenditures (eg Council Tax, finance interest, strata fees etc), and look for a property which will give you a surplus once all costs are covered. This will mean that if your financial situation changes, your investment property is taking care of itself financially and you’re not stressing about additional payments.
5. Tenants from hell
- Fear: Doing an internet search for ‘tenant from hell’, and the horror stories are enough to put anyone off buying an investment property!
- Overcoming the Fear: Use a property manager who has access to all available screening tools to ensure you get a good tenant. A good property manager also knows all the legalities so will ensure tenants are evicted according to the law. Also, taking out a good insurance policy will mean if a tenant willfully damages your property, you’ll have minimal out of pocket costs.
As well as helping you overcome the fear of having a tenant from hell, a property manager will also ensure you find a tenant quickly, so your property isn’t sat empty. Having someone manage your property, carrying out regular inspections and ensuring maintenance is carried out, liaising with tenants will give you peace of mind your asset is being cared for.
While there are common fears about property investment, by educating themselves, working with professionals, establishing clear plans, and seeking support, individuals can effectively mitigate these fears. With diligence and the right approach, and a good property manager, owning a property as an investment can help your financial dreams come true, rather than a nightmare.
If you’re nervous about buying an investment property, and want to talk about your fears, or simply want to know more about our property management services, drop into the Cardiff office or give us a call on 02 4956 9777. Or send us an email at mail@newcastlepropertymanagement.com.au – we’d love to help you overcome your fears, and realise your financial dreams through property.
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