PART 2
Welcome back to the second part of this article where I explore the top 6 mistakes people make when investing in property.
As Warren Buffet famously said …
“It’s good to learn from your mistakes. It’s better to learn from other people’s mistakes.”
Warren Buffet
In the first part of this article we looked at the numbers, research and the impact of having clearly defined goals and parameters. Don’t skip the fundamentals. But now let’s get back to it with …
4. Plan B, C, D and so on
Just as they point out the exits before you even take off when you’re on an aeroplane, the same is true with property investment. Know how you are going to get out before you get in. And have a plan B when things go wrong as I can assure you they do, all the time. Don’t leave yourself exposed. Having a plan B will also allow you to take a measured approach to certain situations. Remember covid? There was such a sense of panic among investors and I can totally understand why. Now I can’t pretend I had made a plan B for covid, who knew that was coming! But I did have a clear view of my numbers and I knew that we had a very long period we could cover if all of our tenants stopped paying (and we have a lot) and all our expenses continued. That back up plan allowed me to step back and think about how best to handle the situation. And as in most cases we didn’t need the fall back plan, but it certainly helped. Things always go wrong, and they certainly do in property investing so plan ahead for it. It’s not about being a pessimist, it is about being a realist. Don’t get caught out.
5. Heart Over Head
In all honesty I am surprised I still see this so much. I am surprised I see investors make decisions relating to property investment based on their personal preferences. This is a business, it really is. When renovating houses you always have to think about your end user, never lead with your tastes. Be objective, separate yourself from the product and see it for what it is; somebody else’s home. It will be your asset but you won’t be living in it and you are probably not the ideal client so take a step back. Not that long ago I walked into a property we manage for another landlord and they had painted all the walls grey – why? Apparently the owner liked the colour, unfortunately the tenants didn’t and it made the rooms look a lot smaller and rather like prison cells. Don’t get carried away and always remember the target client. Often this is when investor over spend and often over spec a property in a market that won’t pay for it. In my role as trusted advisor for landlords my job is to make that separation and match the product with the market, however, it’s easier and cheaper to avoid the mistake in the first place.
6. Financial literacy
As a former financial journalist I am passionate about people learning the tools to be able to take control of their own financial futures. That’s what I am all about. I can’t think of anything worse than relying on the government or somebody else to look after me – I would much rather take control of my own financial future. But you don’t know what you don’t know and that is very much how I started. However, I am great at asking questions and I never move on if I don’t understand something, even if it seems really basic to others. I need to be clear in my head and fully understand something before I invest in it, I need to have a trusted advisor guiding the way. And I would urge you to do the same. When investing in property it is a massive investment, get yourself educated. There are loads of free resources out there (you’ll see many on my website – www.kellylemon.com) – use them, study them, really understand how property investing works because the financial security it can give you when done correctly is well worth it. Refer to some of my other articles about why property investing is such a great way to secure you and your family’s future. But for the purposes of this article I would say – educate yourself. If you were looking at a career move you would do your research. You would want to get a broad overview of the role and upskill where necessary. Property investing is no different.
Don’t let this article put you off investing in property. Everything I have mentioned is a learnable skill and there are so many benefits to investing. Just do it right. Be thorough and avoid many of the mistakes others have made by tapping into what they know.
I hope you have found this useful. If you want a checklist helps you start to get down to all the things you need to consider when making the leap or you want to check you aren’t missing any blind spots if you already invest then I would highly recommend my property checklist.
Kelly Lemon
