Taking the time for reflection is something we rarely do.
It’s always be easier looking forward, because looking back can make us vulnerable and expose the patterns in our lives.
As a young property investor I’ve made many mistakes, here are a few of the big ones:
I thought I knew it all
After reading a few books and attending a few seminars, where I got completely scammed, I thought I was ready to go and take on the world of property investing. I rushed into the market and bought a dud. It was the wrong property, in the wrong building and I bought it in the wrong structure. We also got stitched up on the loan by an ‘award winning broker’ that told us to fix our interest rate at 6.15% a week before a 1% drop in interest rates. This property almost cost me my best friend, I had the property rented out without a professional property manager and lost two months of rent. I also did a ‘cheap renovation’ which went $7000 over budget.
Through this experience I learnt to be patient and to find honest advisors.
I wanted to do it all myself
As a first time investor I thought I need to know everything I could about finance, loans, companies and trusts, tax, depreciation, local markets, recent sales and buying and selling property.
I now realise property investors don’t have to be experts at everything, but we do need to be able to build a team of experts.
If I were starting out again I would focus on finding a great mortgage broker, solicitor and accountant. You can take a look at who I currently use here.
I bought and sold properties too quickly
Like many first time investors I was looking to make short-term gains.
I thought quick wins would help me move forward when in reality they have slowed me down.
After speaking with some older investors I now realised that buying and holding the right type of properties is the way to make real wealth.
I bought with friends
I bought my first two properties with my friends.
Despite the highs and lows of buying with friends the issue I didn’t see coming was serviceability.
When you buy properties with another party you loose part of your ability to service future properties.
This is because the banks hold each party liable for the entire debt.
You may own a $500,000 property with a friend.
In your eyes you each owe $250,000 on the loan, but in the banks eyes you are each liable for 100% of the loan, or $500,000.
On top of this the banks only take into account half the rental return.
Looking back it would have taken me longer to get into the market on my own, but it would have been a better long-term strategy.
Mistake 5 (and the one thing I’ll never do again)
I bought my first 3 properties on impulse
As a young investor I rushed out and picked up a number of properties without considering the effect these properties would have on my future.
During this rush I picked up a neutrally geared unit in a capital city, a run down positively geared house in the middle of nowhere, a house near the beach and have recently built a dual occupancy property and a beautiful home.
The problem with this approach was a lack of method to my madness.
This mistake taught me the importance of picking up the right properties and developing the right strategy.
I’d love to hear about some of the lessons and mistakes you’ve made in the comments below.