3 Ways a Property Investor Will LOSE Money!
There are many ways you can win big by investing in real estate. Equally, if you lose sight of the basics, you’ll end up losing something much worse – money!
No one sets out on their property journey to go backwards financially, so take note of these three common mistakes that investors often make, because if you don’t, it may cost you in the long run.
THEY DON’T UTILISE CAPITAL GROWTH
Our nation’s capitals are going gangbusters when it comes to property prices.
In July 2021 all capital cities reported an increase in house prices, with six – Sydney, Melbourne, Brisbane, Adelaide, Canberra and Hobart – racking up record highs for the third quarter in a row.
Not only is this great news for property investors, but for those ready to get into the market it offers a sense of security that house prices are continuing to go in the right direction as a current trend.
No one is going to argue that rising house prices are great for property investors, especially when it comes to the properties we own.
But, there’s a trap with capital growth that even smart investors can fall into.
First of all, capital growth, at least when you’re in the acquisition and consolidation phase of your investment journey, is a vanity project unless you take action and access that money.
Buying a property for $500,000 and seeing its value rise by $50,000 or even $100,000, feels great. You can sleep well at night knowing you made a smart investment.
But, unless you refinance your loans and grab that equity out of the property, what use is it to you?
Here, by not using your dormant equity, you’re putting yourself in a position that limits your earning potential which will ultimately lose you money in the long-run.
THEY SELL TOO SOON
The quickest way a property investor can lose money is to sell an investment before it’s had the time to work for you.
Working for you isn’t only increasing in value. More importantly, property works for you by creating a second income stream in the shape of tax breaks and rent.
If we take our eye off the long-term plan, capital growth can beguile investors into thinking their property has reached its peak and it’s time to sell.
THEY LISTEN TO THE WRONG PEOPLE
While very few people would chime in on the topic of how best to perform root canal surgery, or try to predict the weather forecast, almost everyone you know will have an opinion about property.
“You should buy, you should sell, you should do what my Uncle Fred did…”
Despite having no experience or expertise, most people think their opinion will be invaluable to you on your investment journey.
(Spoiler alert: It won’t!)
While smart investors might find it easy to ignore their nosey neighbour’s “good” advice, there are some people it’s harder to dismiss. Beware of well-meaning professionals who aren’t experts in property investing.
These people are often the ones you least expect, such as accountants and real estate agents.
For example, with accountants you pay them good money to help you make money. They know all about numbers and were probably really good at math in school. Surely, they know what they’re talking about when they’re telling you to sell your property that just got a bump in capital growth?
No, they don’t! Ask your accountant how many investment properties they own and how much passive income they’re generating via their long-term investment strategy before taking any advice that will likely be a small, short-term win, over a big, long-term gain.
Then there’s real estate agents. Ok, they’re just doing their job, but don’t lose sight of what that job is. Real estate agents are not paid to care about how much money you make over the life of your investment journey. In fact, they aren’t paid very much at all, unless they sell properties. They want their commission TODAY and so the quicker you sell, the richer they’ll be. Taking investment advice from a real estate agent is an oxymoron – it just doesn’t add up.
POSITION YOURSELF AS A WINNER, NOT A LOSER
Through listening to the wrong people and selling too fast, property investors deny their properties the chance to fulfill their potential, and they lose substantial amounts, not only in rental income and tax breaks, but in capital growth.
If your investment strategy is laid out over 10, 15 or 20 years, that’s what you need to stick to. Getting distracted by capital growth or bad advice will only lead to regret and financial loss in years to come.
Talk to property investing experts, like the coaches and mentors at Positive Real Estate who have years of experience and knowledge when it comes to the benefits of investing long-term.
Learn more about how you can take advantage of the current property market at one of our free property investor seminars. You’ll be led by a team of professionals who have demonstrated experience working across all types of markets so you can optimise your ability to grow a budding portfolio, create passive income and get set for the future – whatever that may look like for you.
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