How to avoid common property investment mistakes

OCTOBER 6, 2015 : ABIODUN DOHERTY

   

 

Abiodun Doherty

We all make mistakes at one time or the other, but our ability to learn from them and bounce back in spite of the setback is one of the most important qualities anyone can possess. Real-life experiences abound that we can learn from, since it would be a frustrating time if you desire to learn from your own experiences alone. Learning from others is both time- and cost-effective. The good thing is that there are basic guidelines that help both experienced and inexperienced property investors to avoid some fatal mistakes.

One of the critical issues to deal with is our perspective. The fact is that making money in real estate requires a long-term perspective. Most real estate investments that make the owners real money conservatively are within five to ten years maturity cycles. In many cases the longer you can hold and wait, the higher your profit margin. This certainly goes against the view that classifies real estate investment as a sure-fire, rapid-result strategic investment, as there are only a few success stories. Indeed, there are people that have made significant profits in real estate within a week or month of the purchase of a property, but it’s better to see this as the exception rather than the rule as well as the territory of the very experienced investor.

The property investment process is naturally time-consuming. The initial building blocks are knowledge, a strategy and a good team. It makes good sense to endeavour to understand a few things about real estate investment before you go deeper into it and to also invest in learning as you go along. This process of continuous learning will expose you to several information and experiences that will enable you to make better and more informed decisions.

There is a need for you to have a clear property investment strategy. Many people just wake up and jump into real estate investment with a mindset that they can invest anyhow and make money anytime. This goes against a basic principle that says, ‘failing to plan is planning to fail’. Your plan needs to have a realistic timeframe. You need long, medium and short-term strategies that clearly state the type of real estate investments that you are going to focus on and how long you intend to be in that sector.

There are several factors that will influence your decision in this regards. One of those factors is your age and another one is the resources at your disposal. Your temperament and natural skills set may also come into play in making a choice. There are property investors that will not involve themselves in any land involving traditional land owners because of the challenges that comes with it. However, several lawyers are comfortable investing in that sector because they are better skilled at handling such transactions. At the same time, several people without a background in engineering or building avoid going into large-scale property investments because they lack the skills required to succeed in that sector.

Property investment requires a combination of several skill sets, and that is why a sure-fire way to failure is to attempt to do everything on your own. You simply cannot do this on your own successfully. You need a good team to help you succeed. If you are the type that despises professional services and paying for services, you are likely to have an uphill task in property investment. Remember that if you pay peanuts for services, you get peanut services. Quality professionals who see themselves as part of your team save you money and time. To succeed, you need unbiased and independent advice.

One of the mistakes investors that I would like to refer to as ‘penny wise, pound foolish investors’ make is to only buy cheap property. You should buy property not just because they are cheap or in the low budget range, but because they fit into your investment strategy and they have the possibility of making you money in the near future. You can buy cheap, but don’t just buy anything.

This reminds me of an investor whose major index for buying a property was price. She was a millionaire and could afford to buy property in some of the prime areas of Lagos State. However, her thinking was that since the cost of buying land in some of those prime locations was more than enough to buy land and complete a building in some low-cost area, why bother. Of course, she ended up having several properties in low-cost areas with low growth, and watched with pain rapid growth and appreciation in some of those areas that she despised. Don’t make this mistake. Buy within your budget, but buy in the right locations and based on good research.

source :PUNCH.