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5 Property Investment Pitfalls And How To Avoid Them

By K Damian Qualter

Republish: EasyPublish™ Published: 22Feb2012 Word count: 1035 Viewed: 98 time(s) Get Free Content For Your Site

Property investment can be a risky business if you're not entirely sure what you're doing. There are many potential pitfalls around every corner and if you don't anticipate them they will trip you up and make life difficult. With this in mind we have compiled a list of the top 5 pitfalls to watch out for with regards to property investment.

1. Buying a property because it looks like a real bargain

Below market value property is the crux of property investment for most professional landlords. Unfortunately not every BMV property is the bargain it initially looks though, and some can turn out to be what can only be described as money pits. You may save £20,000 on the price of a property but if you later find structural problems that weren't picked up on the basic survey you had done you could find yourself actually out of pocket.

Similarly you could find what you consider to be the perfect property investment opportunity, but if the property isn't the sort of thing
local tenants are going for it could take a considerable period of time to let, and it may not achieve the rental income you require to make a profit.

In order to avoid your property investment becoming a financial burden make sure you have a quality survey carried out before making an offer or putting in a bid if you're buying through an auction. You should also look closely at the rental market in the area to see if your proposed investment will in fact attract tenants.

2. Treating your property investment like a home

The whole point of property investment is to make money so spending thousands and thousands of unnecessary pounds refurbishing a property is a definite pitfall. A lot of first-time investors make the mistake of decorating their buy to let property in a style that they like rather than choosing neutral colours throughout. They also commonly overspend on the bathroom suite and the fitted kitchen, simply because they go for the set-up they would personally have in their own property.

The easiest way to avoid these mistakes is to put a budget in place from the start. Work out the maximum amount you can comfortably afford to spend on your property refurbishment and break this amount down into decorating expenses, refitting expenses, garden expenses etc. keep your budget in mind at all times and especially if you start to get carried away with fancy fixtures and fittings.

3. Getting your rental valuations wrong

This is one of the easiest property investment pitfalls to fall into and one of the hardest to get out of. All too often landlords who are new to the industry base their rental price on similar properties in the local area and while this works in some cases it can also backfire badly. Your particular property investment may be in a less desirable location, have fewer furnishing included in the rental price e.g. white goods, or generally be a bit more basic than the properties you're basing your rental price on, but unless you find out exactly what is included with the other properties you'll never know.

It makes sense to set a reasonable rental price for your property investment from the start so that you have no trouble finding suitable tenants. The last thing you want is to have a void period when you could easily have tenants if you dropped your rent by a few pounds per month. On the other hand you don't want to charge an amount that only just covers your outgoings; just in case your costs go up and you find yourself having to pay the shortfall.

If in doubt make appointments to visit similar properties for rent in the area and see how they compare to your property. Alternatively ask a selection of letting agents to visit your property so they can give you an idea of the rent you should charge.

4. Buying numerous investment properties on the same development or in the same multi-unit building because they are discounted

You'll often find that developers, and especially those who convert old buildings into self-contained apartments (multi-unit buildings), offer impressive discounts if you buy several units in one go. This may well save you a decent chunk of money but it could leave you in a serious mess if the development fails to attract tenants.

The old adage 'don't put all your eggs in one basket' comes to mind here for obvious reasons. These particular property investment
opportunities sound like a great buy but until you know whether they are going to rent easily it is better to steer clear. Stick to properties you know are in demand and that will in the long run make you a profit.

5. Failing to vet your prospective tenants adequately

You'll never make money from a property investment if your tenants don't pay their rent. Of course there is always the risk of
non-payment, even from seemingly perfect tenants but adequate credit checks, reference checks and guarantor checks help to make rent arrears a thing of the past.

If you don't have the time to vet each prospective tenant yourself you can opt to pay a letting agent to do it for you. It may cost you a fee but if it means you get reliable tenants with good references, good credit scores and a checked guarantor it is well worth the cost. Some letting agents insist you put the management of the property in their hands as well so if you don't want this to happen watch who you are hiring.

These are just some of the pitfalls that those new to property investment often experience. If you always keep in mind the main aim
of property investment i.e. to make money, and work from there you should have an easy road to success that is problem free.

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