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The 8 Must Nots of Property Investment

Jun 26, 2008
In property investment, there are eight rules which you have to follow - these are known as the eight "must nots." If you keep these rules in mind, plan ahead and put in some hard work, you'll become successful in property investing. These rules are simple; you don't need seminars to get information, don't assume anything, don't go it alone, don't become attached to property, don't cut yourself short, don't limit yourself, don't ignore the numbers and don't forget to be practical. Let's have a closer look at these rules.

Rule Number One: Do Not Rely on Seminars for Wise Investments

If you really want to go to a seminar, by all means do so; but don't get caught up in the hype. You can learn a lot of general market information from seminars, but don't count on the speakers to give you useful, specific information. You can learn strategies and how to prepare for unforeseen circumstances, but remember that the speaker is just expressing their opinion; and you have your own.

Ask yourself exactly what you stand to gain by going to this seminar. Then, ask yourself what exactly the speaker gets out of it: why are they pushing this particular area of property investment? Look into it and determine if there is money to be made or if your time and money would be better spent elsewhere. Before you invest anything, know all of the facts.

Rule Number Two: Do Not Cut Yourself Short

Think about all of the potential costs of an investment and decide whether or not you can realistically pull it off. There are always unforeseen costs which will come up, leave yourself some wiggle room for these. Compare the costs of different properties to evaluate whether or not it will be worthwhile for you to buy. You have to be ready to pay for inspections, broker's fees, taxes, utilities, depreciation and all sorts of other expenses that may come up while you own this property. Don't rely on rents to pay for these costs; you should be sure that you can cover all of these expenses without receiving any rent from the property.

Rule Number Three: Do Not Assume Anything

You remember what they say about assuming. If you aren't sure, get sure. It's important to your success as an investor to know everything you can before investing. Property investment is not a get rich quick business. You can get rich, of course, but it takes hard work and patience. Know all of the facts at every step of the way. You need to know the asking price, what the calculated return on your investment may be and of course what you'll have to put into the property in order to make a profit on it. You need to know precisely how much rent you will be receiving for this property, how the tenants are, everything.

Rule Number Four: Do Not Ignore the Numbers

Watch your numbers. Do not borrow more than you can afford. Remember, this property needs to make you money, it's not where you will be living. Think of it as an employee. So the more debt you have the more interest you pay. So you must be able to afford to pay the mortgage regardless if you receive rent or not. Watching your overall cash-flow is definitely important. Remember to be prepared for the unknowns.

Rule Number Five: Do Not Become Attached

Do not become emotionally attached to any aspect of your property transactions. Rely on numbers. Look at the house from the point of view of the buyers or renters. You may never live there, so don't think of the place as yours, think of it as a place you need to get into the hands of the new buyer or renter as quickly as possible. Focus on the purchase price, and the amounts you will earn from selling or renting it.

Rule Number Six: Do Not Do It Alone

Trying to do it all yourself can be a big mistake; you aren't necessarily an expert in every aspect of property investment, nor need you be. Get advice and assistance form the pros. You might think that you can save a bundle by doing it all yourself, but it will likely cost you more in the end. You will need a property lawyer, an accountant, a mortgage broker, an assessor and an inspector certainly. A contractor whom you trust to make repairs as needed would be a good idea too. Be frugal, but don't cut corners; you'll regret it later.

Rule Number Seven: Do Not Forget Practicality

The practical factors, will to an extent, determine the resale value of the property. Being near shops, schools and public transportation are all things to look for. Also, evaluate the neighbourhood. Is it safe? Are the schools well regarded? Knowing about the age of the home is important too. You should know if the wiring and plumbing are antiquated, if the home is well insulated and how it is heated and/or cooled. These are all things which buyers, renters and insurers will ask you.

Rule Number Eight: Do Not Limit Yourself

Don't stop at one property. The more properties you have in your portfolio, the easier it will become. Each time, you'll learn, which makes the next investment easier. You'll also start to understand the market trends and be better prepared to take advantage of them.

Why Seek Help?

You need a good mortgage broker who can get you the best loan for your investment needs. If banks turn you down, perhaps you can find a creative financing expert who has other ideas. Property investing takes a lot of work and dedication - as well as a willingness to seek out the help of experts when needed. With the right mortgage broker or other financing expert in your corner and sufficient research, you can make wise investments which will make you a tidy profit.
About the Author
About the author: James L. Hardcastle can show how to wisely invest in property to become profitable. Visit "Loans Australia" website for more great ideas on property investment.
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