Buying real estate is about more than just finding a place to call home. There is always a trend or a crowd where your friends or neighbours are crazy about buying properties due to the high demand during the rising of the market. Everyone is talking about property that can make them rich! Developers are making great bucks from purchasers. Sadly to say, there are purchasers who make huge losses from property investments that are forced to sell away the property and the worst case lead to bankruptcy during bad time especially with the current economic climate around the world. Buying property cant make you rich, but investing the RIGHT property with proper mindset, sufficient planning & adequate knowledge will guarantee you a stress free path in growing your wealth.
Mistake 1 – Buying without sufficient planning
When you are going for grocery on sunday morning to replenish your food, will you check your wallet whether any sufficient cash that meets your weekly or monthly budget? Normally people don’t worry as there are alternative payment method such as debit card or credit card.
However, the above norm does not apply in property investment. There is a saying: Buying property would be one of your biggest investment. I certainly agree with that statement. Buying property be it for investment or home purpose requires a careful planning especially in financial aspect. Leverage on bank loan is a smart way but it is fundamental to plan your monthly instalment payment to bank. Sometimes, money instalment can be liabilities when you do not have thorough planning and understanding on your investment return.
Always remember the principle “do not overly leverage” your cash or savings.
Mistake 2 – Follow the crowd and not based on your own decision
“The unit is selling fast” or “ still left 3 units available” or “limited units available”
Does this sound familiar to you? It creates impression that this housing project must be good or worth to buy. Have you falled into trap before and eventually realise this is not exactly your dream house or right investment?
This is what exactly happen to some of the buyers. People tend to believe what is happening in their surrounding without conducting further checks. This is very risky move where investors do not make their own decision but instead following the crowd in order not to miss out the “bad deal appearing good”.
Always, always exercise your own judgement and decision as nobody will deposit money in your account when you are in trouble!
Mistake 3 – Forget about numbers
Real Estate is a game of numbers. Calculating the numbers are important to estimate your investment returns.
There are 2 properties: (i) a run down old house (2) uncompleted unit which is new
Usually, buyers will go for the second property but it may not fetch a high return on investment. In contrary, the first house is offered at a cheaper price due to the run down condition but it has higher potential return once it is renovated. Some people look for a beautiful place. Others make a place beautiful. There are property investors who are not making money in property investment as they are not too concerned about profitability and just want to get it over by transacting at a detrimental price.
As such, knowing the numbers are essential in calculating your investment returns.
Mistake 4 – Do not understand the property market
Savvy investors aware of how real estate market works. It is very much affected by the world economic and financial market. The property market moves in cyclical in nature. Property values may rise due to strong market growth, remain steady or even decline during certain phases of the cycle. Hence, it is important to know where the market is within the cycle to plan your property game.
Nobody knows what will happen in the future. However, our past statistic data shows that there is 4 phrases in property market: (i) Upswing (ii) Boom (iii) Decline (iv) Depression. Timing is important in property investment and knowing different strategies for each cycle is significant for property investors who wants to build wealth through property portfolio.
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