Two Major Mistakes to Avoid (that can ruin a purchase)
As a buyer in today’s Australian property market, you have to be confident. You also need to be well-informed and ready for the realities of property ownership. That last part is what can trip up many buyers and lead to mistakes that cause them to either miss out on a great deal or overcommit in a situation they could have avoided.
For anyone considering getting into the market as an investor or for investors who are starting to grow wary of the slowly cooling market, here are two of the biggest mistakes you can make as an investor and how to avoid them before they ruin a purchase you’re set on making.
Thinking Too Hard About a Decision
We have more data now than ever before and it’s tempting to use it to the full extent possible. From analysis of comparable nearby sales to charting the growth and potential of a given suburb and its surrounding areas, there is plenty you can (and should) do with the data available to you.
But it’s very easy to go too far and spend too much time analysing data and thinking about a potential investment to the point that you become paralysed with inaction. There are several ways this can happen.
Fear can be a major factor here, causing you to worry that you might be making the wrong decision when the time comes to make that final bid. Or you may start looking for the strongest negative components of a property – nit-picking and pulling apart a deal that is otherwise brilliant.
There is absolutely something to be said for investing carefully and doing your research, but when a perfect deal stares you in the face, you shouldn’t walk away because of a broken curb or an overdue paint job.
Falling for the Nostalgia Trap
On the flip side, it’s possible to make decisions based almost entirely on emotion – whether it’s a home that reminds you of your childhood or one in an area you personally love but that might be on a downturn in the market. When nostalgia or emotion takes over in the decision making process, you are far more likely to stretch your limits and spend more than you have budgeted. You are more likely to pay full market value or even over market value for a property and then find ways to justify it to yourself after the fact.
This predilection to find excuses for an otherwise poor financial decision goes against everything a good investor should follow when buying a home. It might work if you plan on living in that home for the next 30 years, but if the goal is to find tenants or flip it in the next five, those emotions can cost you dearly.
Finding the Right Balance in your Decision Making Process
The right investment is one that straddles the line between how it makes you feel and what it offers on paper. If you really don’t feel like a property is the right fit for you, maybe it is not, but that response should be based on several factors, including the paper valuation, the current condition of the home, its location, and what your relationship to the home will be during your ownership.