10 Common Mistakes Property Investors Should Avoid
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Loading... - Nelson Kyeyune
- 28 Jan 2022
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Investing in real estate can be very lucrative, and has traditionally been considered the best method to build wealth. However, expertise in property investment is built out of years of experience and not handed out in the blink of an eye, as some prospective investors may imagine. The wrong move can drive one into huge losses if not well managed.
Therefore, Real Muloodi News has gathered some common mistakes that property investors should avoid:
1. Short Term Investments
Typically, you should look at real estate investment as a long-term investment strategy. This means that your investment money is likely to be tied up for a long time.
The exception to this is to fix and flip real estate, which is buying a house below market price, renovating it, and then selling it in the short-term for a profit. However, with most traditional real estate investments, you need to exercise a little patience and allow the property’s value to appreciate.
The challenge is expecting to achieve big things in a short time – this is likely not going to pay off.
2. Buying the Wrong Property
It is common practice for rookie property investors to buy properties that become money-pits because they fail to inspect the property properly. The house may have structural damages that are not easily detectable to a novice, or foundation or plumbing issues, or other big-ticket items that will financially drain you to repair. Always get a professional inspection before you buy.
3. Lacking a Plan
According to Irish author Stephen Keague, “Proper planning and preparation prevents poor performance.”
Before putting down your cash or getting tied up with a mortgage, first, decide on your investment strategy. What type of house are you looking for, for example; one-family or multi-family, vacation destination or not? Figure out your purchase plan, then look for properties that fit that plan.
All too often, people first purchase property and then decide what to do with it, and only in hindsight realise that particular property may not have been the best investment decision given the direction they want to go.
4. No Research
It is vital to do due diligence on any property you intend to buy. To begin with, you should be aware of the tenure system. In Uganda, there are four types of land tenure systems; customary, mailo, freehold and leasehold. If it is a leasehold, for example, how many years are left on the lease?
Check that there are no incumbencies on the title. Research the neighbourhood and have the property inspected because, without due diligence, your financial stability and capital growth may be on the line.
5. Using Your Heart and Not the Head when Buying or Selling
It’s easy to get emotionally attached to an investment. While gut feeling and instinct play an important role in real estate investing, so does data.
There is so much information that can be analysed: market data, property data, cash flow, rental projections, etc. This is data that can accurately predict trends for you. Use data to stay grounded. It can help you ensure that you are making a good investment.
Emotional decisions often lead to less value for your property investment. Read More…
