Many new investors who hope to gain financial freedom by investing in property usually face barriers and fears at every stage of the investment process. Although these fears are real and legitimate, they can significantly set you back years unless you face up to them.
Emotional Barriers are Real and Legitimate
Many people spend countless hours researching the latest TV or camera model before they commit to buying. They compare models and shop around for the best bargains. In the same way, you should spend time educating yourself, researching the market and attending open homes in the suburbs you want to buy into. You should never buy an investment property based solely on emotions or second-hand advice.
The emotional barrier hurdles common to many new investors are both psychological (fear, greed and buying on impulse) and financial (poor credit history and financial structure).
So what are the more common pitfalls that new investor’s fall into that more experienced investor have learnt to avoid?
1. The Fear of Not Being Able to Repay your Home Loan
Most people who desire to buy their own investment property often procrastinate, fearing that they may not be able to repay their home loan. Even if you have a family to support, this concern shouldn't stop you from planning ahead.
If your fear is not being able to repay your home loan, you should consider buying properties that are cash flow positive. Using a cash flow strategy with an interest only loan can provide you with a weekly income that can go towards servicing your mortgage and unforeseen property expenses. The additional income can help with serviceability and allow you to build up your portfolio, as the banks will take the additional income into account.
2. The Fear of Buying the Wrong Property
If you fear buying the wrong property, the easiest remedy is to educate yourself before you start investing.
Solely relying on your emotions or the unqualified advice of friends and families, is one of the worst decisions you can make. Instead of taking a gamble, educate yourself to the point where you can formulate your own investment strategy based on your circumstances and risk profile.
3. The Fear of Tenants Damaging your Property
If you fear taking on tenants that will damage your property, there are ways to protect your assets to ensure that this doesn't happen.
The first thing that you should do is to take out combined Home and Landlord Insurance. For as little as $20-30 per week, you can protect your investment property from malicious damage by tenants and protect your rental income in case the property becomes untenable.
Doing your Due Diligence
You can minimize your risk by employing the services of a buyer’s agent – particularly if you don't have the time or experience to analyse a property. A good buyer’s agent will sit down with you and go over your goals and investment strategy; they will work with you to find the ideal property to add to your portfolio.
When it comes to buying a property that will perform and provide for your retirement, the only sure way to overcome your emotional barriers is to take the necessary steps to educate yourself. It’s the best measure to mitigate risk and build a property portfolio that will help you to become financially independent.
Property investing is a dynamic and changing process. Start your learning by arranging a free appointment with our mortgage brokers who can advise you on how to pull out equity for a home loan deposit, how to invest in property using your super fund or how to find a suitable home loan that may better suit your risk profile.