3 Fatal Property Market Mistakes Young Investors Make
There are reliable stats to confirm that many young faces are entering the world of real estate. Compared to any other time in the past, the landscape of property market is now dotted with more Gen X and Gen Y investors. What they lack in experience they attempt to make up for with enthusiasm. Still, there are traps and lures aplenty in the real estate arena, and it is important that they know how to avoid them, or they will be committing a lot of fatal property market mistakes.
Propert market mistakes committed by young investors
There are several mistakes young investors commit and together, these chase a good number of them away from real estate after just a short stint. If only they were a little more careful, they could become seasoned investors with substantial portfolios. Let us look into three such mistakes young property investors typically commit.
1. Not conducting optimum research
Young people, despite greater familiarity with the virtual world, often fail to conduct optimum research. Out of 1.8 million property investors, only about 15,000 have more than 6 properties. Put another way, only 0.8% investors are what you would call really successful. These successful investors have a lot of traits in common, the ability to conduct research being one of them.
2. Lack of Due Diligence
Young investors usually do not pay enough emphasis on Due Diligence. This can be a fatal error. There is no dearth of properties that suffer from one flaw or another. For instance, a property may have an egress as part of a neighbour’s encroachment. It may even have a pest or a mould issue or a structural deficit. It may be located in an area with a very low comparable sales figure. These aspects can only be hunted down through Due Diligence; something which young investors clearly have to learn about.
3. Looking only for positive cash flow
Young investors are not too keen on the concept of negative gearing. They want to fight sans the tax leverage and subsequent capital growth. To them, positive cash flow and high rental yield are more enticing. This can prove to be a big flaw. It is one thing to want to not to pay out of your own pocket (something that positive cash-flow provides) and another thing to be disregard the great many benefits of a capital growth-based investment strategy. A portfolio should ideally be a mix of negative and positively geared properties.
No one comes into this world armed with all possible knowledge. Real estate gives ample time to its sincere students to go through the learning curve. If you can treat your initial failures as a resource, you will have created a powerful portfolio for yourself in about a decade’s time. Who knows, you may be in the top 0.1% with 20 properties or more.