What commons mistakes do first time investors make?

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danny elfman
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Joined: Tue Jul 02, 2013 6:52 pm

What commons mistakes do first time investors make?

Post by danny elfman »

Hi,

I wanted some advice on property investment. I have a friend who is really getting great results from investing in real estate and it got me into thinking, “If he can do it, then so can I!”

I’m really new to this investing business and I wanted to know are there any common mistakes I can avoid before stepping in?

Thanks.

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Otto Dargan
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Re: What commons mistakes do first time investors make?

Post by Otto Dargan »

Hi danny elfman,

Property investment can can be very rewarding if it is done correctly. Of course, there are no guaranteed ways of having a 100% successful investment.

Recently we conducted an interview of experts from the field of property investment and they talked to us about the the common mistakes made by first time property investors.
  • Many investors rush into investing thinking it will give them instant profits.
  • Even if they do take their time and decide which property they want to invest in, they do not plan their finances carefully.
  • Some investors pay more for the property than it is really worth without knowing the actual value.
  • A lot of investors have to face losses due to unplanned finances and lack of research.
  • New investors are unsure as to whether they can make the monthly repayments or not. Along with it, they are not ready for other unseen fees such as strata fees etc and additional fees like stamp duty and land tax. If these are not paid on time, it can hit you hard.
  • They have not been able to decide on their investment goals.
Hope this helps.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

danny elfman
Posts: 47
Joined: Tue Jul 02, 2013 6:52 pm

Re: What commons mistakes do first time investors make?

Post by danny elfman »

Thanks for getting back to me. What do you mean by ‘do not plan their finances carefully’? Is there anything in particular that a interested investor need to be aware of? :?

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Otto Dargan
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Re: What commons mistakes do first time investors make?

Post by Otto Dargan »

Many of the experts in the mortgage industry are property investors themselves and according to them, having a clean credit history is always a bonus and also seen favourably by the lenders.

As a person interested in property investment, you can improve your credit score by cancelling unused credit cards and paying off other debts.

Along with it, having any kind of adverse listings in your credit file like missed payments, late payments or defaults can also decrease your chances of getting a home loan approval.

Therefore, a new investor must take care and manage his current finances so it does not affect the chances of him getting a home loan later on.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

danny elfman
Posts: 47
Joined: Tue Jul 02, 2013 6:52 pm

Re: What commons mistakes do first time investors make?

Post by danny elfman »

Thanks for the information, Otto. I read the blog post on ‘8 Mistakes New Property Investors Make’ and it was very helpful to understand the basics.

One last thing, as a first time property investor, how much can I borrow? Haven’t looked at any property but wanted to gather some information.

Don Juan
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Joined: Wed Jul 03, 2013 2:10 pm

Re: What commons mistakes do first time investors make?

Post by Don Juan »

Hi Otto!

Like danny elfman says here, the article was a really light read and covered the basics. Would you mind explaining this sentence, “investors get enticed by real estate agents into paying more for properties than their actual values”?

DO real estate agents really do that? I was quite surprised to read this. How can be save ourselves?

Thanks a heap.

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Otto Dargan
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Re: What commons mistakes do first time investors make?

Post by Otto Dargan »

danny elfman wrote:Thanks for the information, Otto. I read the blog post on ‘8 Mistakes New Property Investors Make’ and it was very helpful to understand the basics.

One last thing, as a first time property investor, how much can I borrow? Haven’t looked at any property but wanted to gather some information.
danny elfman, for investment loans, you to have the following things to qualify:
  • 5 – 10% in genuine savings
  • A good credit history
  • An above average credit score
  • A stable employment history
Your property should also meet the following criteria to be acceptable by lenders:
  • A standard unit, house, townhouse or a land for construction
  • More than 50 sq meters
  • In a good condition
  • Located in a major city or town
Our lenders can usually let you borrow up to 90% if you can prove you are in a strong financial situation. You will be eligible to borrow 95% only if you can prove 5% in genuine savings, 20% equity in another property and a strong financial position.

If you would like to borrow almost 100% of the property value then if you must use any other property that you already own as security, or if you ask your parents to guarantee your loan.

If you would like to know more just give us a call at 1300 889 743 or enquire online and one of the brokers will get back to you shortly.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: What commons mistakes do first time investors make?

Post by Otto Dargan »

Don Juan wrote:Hi Otto!

Like danny elfman says here, the article was a really light read and covered the basics. Would you mind explaining this sentence, “investors get enticed by real estate agents into paying more for properties than their actual values”?

DO real estate agents really do that? I was quite surprised to read this. How can be save ourselves?

Thanks a heap.
Hi Don Juan,

Please remember that not all real estate agents are created equal.

Real estate agents might be able to lure first time investors and home buyers into paying more than the actual price of the house only if they have not done the required research.

Many investors are unaware about the fact that when they buy a property they are paying for two types of components i.e. land component and building component. According to one property investment expert, if more than 60% to 70% of what you are paying goes to the land component, then you are investing in an appreciating asset.

However, if you are paying the same ratio for the building component then you are investing in a depreciating amount.

Investing in a land component will give you great returns in the long run. In order to make good investment decisions, you need to do a lot of research and ask a lot of questions to your real estate agent regarding the property.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

danny elfman
Posts: 47
Joined: Tue Jul 02, 2013 6:52 pm

Re: What commons mistakes do first time investors make?

Post by danny elfman »

Thank you for your help, Otto. :) I will definitely call you guys soon.

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