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Q & A
How not to get into a property “ mess ” to start with ?
Invest in property based on hearsay or vendor ’ s claims and you ’ re likely to be ultimately in big trouble . To be a successful property investor you need local and practical knowledge and skills .
Too many investors are fixated on house prices but what is critical is the rent you get . Do you have a solid command of the supply & demand dynamics of the rental market in your target area ? What is the sustainable achievable rental for the property ? What type of renters like to rent in the area ?
What vacancy ratio should you be expecting ? What default ratio should you be planning for ? A combination of discussions with rental agents ( not sales agents ), local property investors and available reports like the TPN Area Investor Report will give you what you need to forecast your profit and cash flow .
Having guided and supported thousands of aspiring and growing property investors over the years , I have noted too many make these 3 fundamental mistakes : 1 . They don ’ t have a cash buffer of 2 to 3 months of operating costs for their investment property to cater for the inevitable months where you won ’ t have ( paying ) tenants
2 . They have poor understanding on how to screen rental applicants , how to manage tenant payment risk and what to do ( and not to do ) when a tenant is late on rental payment
3 . They over-estimate the rent they can get and under-estimate vacancies and other expenses that come with owning a property
If you ’ re unable to honour your property financial commitments , quickly contact your home loan provider before the bond repayment debit-order bounces . Have a frank discussion with them and see what financial support you can get . You might be positively surprised .
Just because you are now having challenges , don ’ t write off property investing . It remains the most proven route to build wealth . The key is not to just buy any property and wait ( and hope ) but to buy the right property , in the right area , at the right price , with the right financing and the right tenants .
Get back to the drawing board . Empower yourself with knowledge . Invest again .
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Real Estate Investor Magazine DEC 2023 / JAN 2024 14