Being aware of the common mistakes associated with property investment can help you gain the best possible value from an investment.
Property investment is a popular way to increase your wealth and secure your
financial future. But changes in interest rates, fluctuations in supply and demand,
and even emotional decision making processes can make managing an investment
property a difficult task. How an investor manages their investment ultimately determines whether or not they will reach their financial goals. Below are some common mistakes associated with property investment that should be avoided:
Repaying debt simultaneously
Attempting to repay all your debt at the same time is tempting. But not all debts
are equal. There are certain kinds of debts that are more beneficial than others, such
as those that include tax deductibility. Eliminating non-tax deductible debt (such
as personal loans) before tackling tax deductible debt (like the investment property
loan) can minimise the debt that doesn’t give you any extra cash at tax time, and
maximise the debt that possibly can.
Ignoring the market
Investors often forget that the rental market moves at a different pace than the property
market. Their rent is therefore often left unchanged for years, and by the time they
choose to increase payments, they may have to do so with an amount that won’t be
well received by the tenants. To avoid this, investors may want to consider adjusting the
rent amount by $10 – $20 every time the lease is renewed.
Favouring occupancy over return
Some investors can begin losing money because they refuse to adjust their ideal
renting price. This approach can result in a property remaining vacant and a huge loss
of income since no one is willing to pay that much money. Simply dropping the amount by
$30 – $40 can attract a potential renter.
Managing your property
More and more investors today attempt to manage every aspect of their investment
property. Dealing with tenant complaints and other management tasks can take up valuable time that should be spent elsewhere, on things like improving their overall investment strategy. Employing the services of a property manager can reduce risks such as safety requirements or other legislative changes.
If you wish to discuss this further or you have other rental property related questions please contact Property Tax Specialists on 07 3103 8551 or email tony@leeandlee.com.au
