5 mistakes to avoid as beginning property investors

By: Alex Carlson

1. Purchasing a property as a person and not as a business – depending on your country, making the purchase of a rental property must be made by a legal business to deduct the monthly mortgage expense. Otherwise you can end up paying a lot of tax on rental income even if you are losing money on the property.

2. Not getting rent insurance to save money – this can be a huge mistake! In many countries the renter is overprotected by law and in some instances it is very difficult to kick out a renter who is not paying. You must always have insurance to keep yourself safe against unscrupulous renters, that will pay you and legal proceedings if they don’t.

3. Purchasing in an up market at a high price – even if you are buying to rent long-term and the monthly cash flow is in positive numbers you should never pay too much for a property or buy at the top of a market. This will eliminate any chance of selling it for a profit with a reasonable number of years.

4. Using the seller’s price to start negotiating – what the seller is asking means nothing. Make your own evaluation of what the property is worth and make an offer based on that. Never feel bad about making a ‘lowball’ offer. Offer less than you are willing to pay and only come up to that set amount, completely ignoring the initial asking price.

5. Not investigating community behavior and expenses – make sure you look over a history of community actions that will involve your money. Sometimes communities vote constantly for repairs and improvements which will cost you a fortune and kill you property’s cash flow. They can also mismanage money and over pay for repairs.

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Alex Carlson
Learn from our financial failures and improve your financial IQ in these times of great opportunity, with real small time investors, Fred and Sally, as they share real experiences and simple lessons learned in investing.

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