Investing in property is much like running any other business, in that it requires research, conscientiousness and an acute attention to detail.
As with owning a business, a property investor needs to capitalize on opportunities in the market and more importantly minimize their potential for making costly mistakes. Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that there are certain mistakes that property investors could make that would be more detrimental than others, so it is important to understand what they are and how to stay clear.
“When it comes to property investment it is far better to learn from other’s mistakes, then make them yourself. An incorrect investment decision could potentially be devastating, affecting the investor’s financial well-being both now and in the future. Those who are new to the real estate investment landscape should learn from savvy, seasoned investors and avoid possibly dangerous business mistakes,” says Goslett.
He provides a few mistakes that property investors should watch out for:
Not seeing people as an asset
While property is the commodity that real estate investors use as a means to supplement their income, it is certainly not the only asset that investors have in their arsenal. There are few things that are worth more than the people the property investor chooses to work with. While an investor may buy and sell many different properties over the span of their real estate investment career, the best investors will have the foresight to understand that their network and relationships with the right people can net them more profits than any one property deal.
“Property investment is not just about bricks and mortar, it is a people business. It is important not to focus only on the bottom line and neglect the people that made the deal possible. Building and nurturing the right relationships is one of the key elements to real estate investment success. A good rapport with people can propel any business to the next level. It is vital to work with property professionals who are reputable, experienced and well-connected,” advises Goslett.
No plan B
There are several aspects that need to come together to ensure a successful real estate investment. An experienced investor will be aware of this and have a system in place to ensure that as little as possible is left to chance. However, even with what would seem like a fool-proof-plan, there could always be unexpected elements that will be need to be accounted for. “In reality not all plans will go as expected. In fact, it is important that investors have a backup plan to cover themselves in the eventuality that their original plan fails. It is never good to assume that all will fall into place without complications. Those who have more than one plan to rely on will have a higher inclination towards success. Never be content with having everything riding on one method or system,” says Goslett.
Growing the portfolio too quickly
Every profitable property that an investor owns will add to their bottom line and increase their ability to expand their portfolio. However it is important know when to expand and when to hold back and maintain. “While expansion is good, growing too quickly can run the investor at the risk of expanding beyond their means. This will essentially set the investor back, rather than propelling them forward. A property investor should continuously be aware of the market and take cautious steps when looking at expanding their portfolio. An interest hike for example, has financial implications on a homeowner who owns a primary residence, how much greater will the impact be on an investor with several properties in their stable? It is vital that investors understand their capacity for growth as well as their limitations,” says Goslett.
“Growing and managing a successful investment portfolio requires merging the right plans, the right people and latest the technology. Investors need to work with people who can contribute to their growth, implement plans that can repeat successful results and utilize technology that will maximize their efficiency,” he concludes.