The BUSINESS of Property Investing

In the past I talked about the Property Investors Mindset and 10 steps that can help train yourself to get there.

For those that missed it, it can be found here.

Today I want to talk about…

The BUSINESS of property investing and some common mistakes first-time investors make.

Basically, property investing is similar to owning a café.

Your tenants are your customers in which they pay you via rent; you’re providing the food and coffee which is what they call home.

Running costs for a café would include paying the staff, food suppliers, utility bills, loans & leases.

Similarly, with property investing we have property management fees, council rates, utilities, loans, taxes and maintenance costs.

To get your foot in the door with owning a café you need to do fitouts, purchase equipment at the bare minimum.

This no different in property investing where lenders will only lend to you if you have enough cash to put down as a deposit/down payment. To get a good idea of how much money you generally would need to have in cash would be around 8% of the selling price of the property.

Many investors don’t get to go past owning 1-2 properties, so where did they go wrong?

Most cases, strategy or even LACK OF strategy.

Property investing is a business. You wouldn’t start a business with no plan or idea so why would you start investing without a clear and structured plan?

Your investment plan needs to be in line with your long-term goals.

Being a first-time property investor comes with a lot of responsibility and mistakes can happen without having the right knowledge in managing an investment property.

Some common pitfalls are:

  • Not treating the property like a business
  • Maintenance of the property: many first-time investors are usually light on cash flow or cheap out on keeping the property well maintained.

    A fresh coat of paint or new carpets can make a big difference to the value of the property. Not only can a well-maintained property help boost its value, but it will also be more appealing to renters and can help keep it tenanted. If a property looks rundown, renters will not be willing to pay as much for it.

    Personally I am guilty of this and I learnt the hard way where my first investment property I chose not to repaint the walls and I could not find a tenant for 4 months. I decided to repaint the whole house and the real estate found a tenant next day.
  • Not using a property manager.
  • Not creating an expert team.

There’s a lot more to the above, so I’ll break it up into parts.

Next time we cover on “How to select your perfect property manager”.