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5 Property Investment Mistakes You Must Avoid

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If you are newbie real estate investor, you are more prone to making mistakes. For the apparent reasons, nobody is going to expect you to have all the information before even starting to build your investment portfolio, but it’s smart enough to know about a few major mistakes that you can make and how you should avoid those. Keeping that in mind, we have come up with a list of 8 mistakes that investors make along with some tips that’ll help you avoid those. So let’s dive in;

Your Heart Takes Decisions

When it comes to investment, there’s no place for emotion. But still, we find people investing in properties that are close to home so that it’s easier for them to drive past or many of them even choose to buy property they like the look or feel of. For sure, it’s not at all a strategic move to buy property. Experts say that if you get emotional about potential properties, you’re sure to make the wrong decision. Consequently, you’ll end up buying properties that won’t deliver in rental yields and tax benefits as compared to others.

Self-Managing the Tenants

Things might get tricky when it comes to managing all the aspects of your investment property. When you start managing your tenants by yourself, you’re bounding yourself with a ton of mess like dealing with various tenant complaints and needs. This way, so much of your time will be taken up that could have been wisely spending in furthering your investment portfolio. Therefore, make sure that you spend most of your time in building and strengthening your investment portfolio rather than having all your valuable hours taken up by the tenants and their complaints.

Buying Older Properties

Are you up for investing in an older property? Well, this may sound appealing to you but keep in mind that you’ll only be able to claim depreciation tax deduction if your property is less than 4 decades old. If you buy a property older than that, you can’t take advantage of the depreciation benefits. On the flip side, you are quite likely to be able to claim full depreciation benefits if you invest in a brand-new property. Not only you’ll be having lower vacancy rates & maintenance costs on the newer properties, but also you’ll reap a better profit on reselling.

 

Cross-Collateralizing

What is Cross-collateralization? This is when the investor uses 2 or more properties financed by one bank in order to secure loans with the same bank for future investments. Mostly the newbie investors make this mistake, which can turn up deadly in their real estate career. Experts say that it’s a big mistake to have your home loan and other properties under the same bank. Therefore, make sure you do it while building your portfolio & the bank could end up holding all your cards, putting your home at risk.

So how you can avoid the cross-collateralization? You can do this by using the equity from your home covering deposit & costs of buying another property without putting your home at risk.

Looking for the Lowest Interest Rate

This might seem or sound fascinating, but it’s now always the clear-cut. Do you believe that the lowest interest rate on a property loan is probably the best deal to get along with? You’re surely the newbie real estate investor then.

Well, you might get a loan on the low-interest rate, but that doesn’t guarantee anyway that you are going to get the cheapest loan out there. Make sure that you check the fine details of the loan thoroughly. You may not have enough idea that some of the banks usually limit extra payments into your loan. And other might enact a minimum loan amount to qualify for cheaper deals.

As per the leading real estate companies in Sharjah, you may consider face breaking the fees in case you are willing to get out of a fixed rate before the term ends. Or the other option is you might be unable to redraw additional payments. Either way, the interest on the loan will surely be a deductible expense for your investment property.

 

Summary

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