Common Budgeting Mistakes Investors Make in Australia

Investing in real estate is a great way to build wealth and secure the financial future. The current Australian real estate market trends drive many Australians to invest in property. Some investors buy investment property with the objective of selling it when the property values are up, while some investors rent property to make it a permanent source of passive income. However, as with any investment plan, property investors in Australia also commit some budgeting mistakes that they should avoid. In the world of real estate investing, even a small budgeting mistake can eat all the profit on investment hindering your growth as a real estate investor. What are the budgeting mistakes property investors often make in Australia?

Common Budgeting Mistakes Investors Make in Australia

Whether you’re aimed at expanding your real estate investment portfolio or buying the first property, avoiding these mistakes and considering the mentioned solutions will safeguard your real estate investment helping you achieve your wealth-building financial goals.

1. Not Having a Strategic Investment Approach: Earning by investing in real estate is a long race. Without having a proper strategy for the particular investment, you often rush to make decisions that you regret later. Most first-time investors tend to invest for instant benefits, such investors realise later that they could have better investment opportunities.

Solution: The real estate investment strategy varies with the goals and individuals. Just because a renovation in your neighborhood worked well for the owner doesn’t mean it’ll be the same beneficial for you. Set your goals to achieve and formulate a suitable investment strategy and stick to it.

2. Waiting A Long to Find a Perfect Property: Waiting too long to find a promising property can set you back. If the real estate market is red hot, each day you wait may eat your earning potential. Some investors wait to have a standard 20% deposit to avoid the Lender’s Mortgage Insurance cost but if the property prices are going up quickly, the increase in price might be more than LMI.

Solution: If you have a perfect investment strategy, it is better to dive into investing instead of waiting a long. Do your homework. Understand the current market trend. To decide right whether you should buy a property now or continue to save for a 20% deposit, you can use the buy now or save more calculator.

3. Preferring The Lowest Interest Rate: Many first investors aimed at only the lowest interest rate. But, the lowest interest rate doesn’t guarantee for being the cheapest loan. Other factors like fees, penalties, and repayment terms are also important too.

Solution: Explore the complete details of the investment loan instead of just being focused on the interest rate. Choose the most suitable loan as per your investment goals instead of choosing the cheapest interest loan.

4. Making Emotion-driven Decisions: Emotion-driven decisions often become a hindrance in determining the fact-based property investment strategy. Many investors buy a property just because of its location near their home or because they like the colour. Buying an investment property is a big decision, so, don’t let your emotions become a barrier to financial growth.

Solution: Rely on data-driven reports rather than emotion. Several online sources provide updates about the real estate market to help you make an informed decision about your real estate investment. You should analyse property prospects by checking the historical growth and social aspects like employment opportunities, public transport, ongoing or planned development, etc.

5. Trying To Buying Older Properties: Owning a fancy old villa maintained by generations sounds good. However, older properties often demand higher prices than newer ones. Buying an older property doesn’t enable you to claim depreciation as a tax deduction and this privilege is available only on the 40-year-old legacy properties.

Solution: Target to buy new properties to gain multiple benefits that you might miss if you buy old property. Some benefits associated with buying a new property are lower vacancy rates, lower maintenance costs, tax benefits for depreciation, higher rental income, more tenants preferring modern amenities, cash grants, stamp duty discounts, etc.

6. Not Involving Real-Estate Agents: Many investors don’t want to involve a real estate agent, financial consultant, or mortgage broker because of a myth that their involvement is necessarily too costly. However, their main agenda is to guide and support you for strategic real estate investment ensuring the maximum return. By not involving a real estate mortgage broker or loan adviser, investors often struggle to get the best suitable financial support for comparatively fewer options.

Solution: Involving a buyer agent is good but do not agree to buy a property without being convinced. You may contact multiple real-estate agents instead of believing one. You can arrange your own independent property inspections also to check the building’s condition.

7. Borrowing Exceeding to Repayment Limit: Many investors don’t analyse their repayment capacity based on facts and considering risk factors. Make sure you can afford loan repayment without the rental income. There may be unforeseen costs like new strata fees, plumbing repairs, and other maintenance.

Solution: Ideally, put aside 3-6 months of installments to your savings account so that you can use this amount during the time you don’t get passive income or you don’t get regular income from the main source. If you’re borrowing for a property that needs renovations, keep the funds reserved accordingly. You can use calculators to decide how much you should borrow.

8. Committing Landlord Mistakes: Some investors do not keep the property well maintained. Ignoring the maintenance issues makes it unattractive to potential renters and you face financial loss because long vacancy period. Some landlords don’t follow the local rental market trend to increase the rent gradually. If you don’t increase the rent gradually and increase it suddenly, you may lose tenant and rental income. A property with a bad reputation either stays vacant for a long or gets lower rent than the market average.

Solution: It is good to maintain your property and pay all the dues on time. Communicate with your renters regularly to maintain healthy relationships. Most likely, they will recommend someone for you when they have to move; therefore, your property doesn’t stay vacant for long.

9. Avoiding Experts: We can’t manage everything related to property purchase and management. For example, managing a property takes a lot of your time. A property manager can do it with perfection keeping you free from all the stressful tasks. Similarly, when it comes to selling the property,? buying a new one, or renting the existing one, your broker helps you get the best deal up to your suitability.

Solution: Take professional help wherever necessary. Experts ease your stress during your long investment journey.

Pro-tip:ASK Financials has years of experience in providing comprehensive service support to facilitate investors strategically navigate and achieve their goals without committing budgeting mistakes. Whether you are buying your first home, building a new home, refinancing your home loan, or expanding your property portfolio, you can book your free chat or contact us at 0430 060 695.