When you first consider investing in property, you’ll likely receive lots of advice about what to do. Still, you’ll notice not many people examine the investment mistakes people make every day. Investing in a property is not easy and as always, there’s no guarantee you’ll ever make a profit.
At the same time, every investment and every investor is different. Different investors have different goals, experience levels and aversion to risk, all of which open up the potential for various mistakes. It’s the same thing with the investment itself – investing in an off-plan property is very different to an HMO and each asset has its challenges.
With that in mind, what are the most common investment mistakes we see in the industry?
1. Investing with Emotion
If you ask any seasoned investor, they’ll tell you that investing with your heart over your head is the most common investment mistake.
When you start investing with emotion, you’re much more likely to make a mistake or rush into a bad investment.
While feeling overwhelmed, excited and nervous is natural, you should always approach investment decisions with your long-term strategy in mind.
2. Skipping Proper Research
Research is key to a successful investment, regardless of where you’re at in the process. From beginning to end you always want to stay up-to-date with relevant statistics, market trends and any due diligence related to the investment.
This is vital if you’re a beginner. While it might seem overwhelming at first, it’s critical to make sure you have a good understanding of the market you’re investing in, how the process works and what you need to expect.
The same is true if you’re a portfolio investor, never skip the research phase. You might think you don’t need it but the truth of the matter is that property markets change rapidly and strategies evolve.
3. Not Investing with Confidence
When you invest with confidence, you’re in a much better place to succeed. It means you don’t end up making rash decisions and the whole process becomes much less stressful.
So how can you invest with confidence? Naturally, our previous point stands. If you go in prepared, with a strong plan backed up by research, you’ll be in a much better place to start investing with confidence.
At the same time, consider working with as many professionals as possible. Having some expertise in your corner, particularly if you’re a beginner, makes the whole thing significantly easier.
We always recommend working with a mortgage advisor or a financial professional but it’s also worth working alongside any industry experts that can help including property managers or investment professionals.
While our main piece of advice is to always research market conditions and how the property might perform, it’s just as important to research the investment process itself.
It might sound obvious but a common mistake many people make is forgetting to actually understand how the investment process works.
For example, many people forget that with a property investment, their money is often tied up for extended periods at a time. This is a simple matter of fact that can heavily impact people’s bottom lines or long-term strategy.
This is why we always recommend taking the time to research the actual investment process – especially the latter stages. You need to understand what’s involved during the exchange and completion process, what to expect in terms of timeframes and questions you should be asking at all times.
5. Trying to Time the Market
This issue is more common with portfolio investors than beginners but is great advice regardless. Many people either hold off investing or sell early in an effort to beat the market, which is always risky.
The main thing to remember with property investment is that it’s typically a long term endeavour. Historically – despite peaks and troughs occurring – property prices have always increased. There’s a reason that property is seen as the most stable investment asset and it’s because of the performance it can offer over the long term.
With that in mind, adopt an approach of aiming to invest and hold for as long as possible. This will help you maximise your returns from both rental income and capital growth.
6. Not Diversifying
As you start to invest more, a common mistake is not diversifying your assets.
Property is a great asset class as it offers plenty of options but it’s important to make sure that you’re not investing in a single place or property type.
Successful investors, for example, may invest in a city-centre apartment aimed at young professionals as well as larger houses designed to appeal to families or student tenants.
So, how can you diversify your investments? Firstly, you might look at different locations across the UK. City centres are popular, which is why we’re increasingly seeing people choosing Manchester, Leeds, Sheffield, Nottingham and Birmingham property investment.
If you’re not looking at investing across a broad range of places, you might spread your assets out across a single destination. Investors in Birmingham, for example, may invest in Digbeth, the Jewellery Quarter, Harborne and the city centre. Each of these neighbourhoods has its own strengths, demographics and thus, potential for diversification.
Secondly, you might diversify between different property types. If we take apartments as an example, you’re able to invest in a wide variety – whether you’re opting for an unfurnished studio or a fully-furnished penthouse suite.
7. Not Working with Property Professionals
One of the most common mistakes we see is people thinking they can manage a property investment on their own.
While it’s not impossible, it’s important to understand that investing in property is often a full-time job, especially if you’re aiming to manage tenant screening and other due diligence.
This is why we always suggest working with professional third parties that can help you manage the load. Property managers can help you screen tenants, collect rent and manage maintenance enquiries. Investment professionals are also useful, as they’re able to offer you insights into the market and advice on how to proceed.
Remember, property investment is a long-term game and the partners you build over that time are often critical to long-term success.
If you’re looking for support with your property investment in Birmingham, you can get in touch with us here or find out more about the developments we have available.
FleetMilne is an award-winning estate and letting agent based on Colmore Row, right in the heart of Birmingham city centre.
Known for delivering excellent service for landlords, vendors, tenants, and purchasers, we pride ourselves on providing elite property services with integrity and personability every step of the way – no gaps or cutting corners.
