5 common mistakes investors make when assessing investment properties

Are you considering purchasing an investment property but don't know where to begin? You're not alone. Many new investors feel overwhelmed by the information and research involved in deciding where to buy, which can lead to costly mistakes. To help you avoid these missteps, here are five common mistakes property investors often make when analyzing rental properties.

Mistake 1: Purchasing a bargain property without researching the area.

Finding a property is not the same as researching it. Before jumping at the chance to buy what seems like a bargain investment property, research the location first. Look for an area with multiple growth drivers, such as a strong local economy, job growth, and the right demographics. Determine what type of property would be attractive to owner-occupiers and investors in the area, and what infrastructure or amenities nearby could affect potential tenants' decision to live there. Don't make the mistake of finding a property first and then trying to justify buying it. Focus on location first, then the property.

Mistake 2: Not factoring in additional costs.

As a landlord, you'll incur costs such as insurance, council rates, land tax, body corporate fees, and maintenance and repairs. While cheap cosmetic fixes may lure tenants, they won't solve underlying structural issues that could end up costing you more in the long run. Look for a property with solid "bones" and opt for hard-wearing materials that will withstand wear and tear. Don't skimp on renovations or repairs, as they can significantly impact your profit margin.

Mistake 3: Focusing on short-term gains instead of long-term strategy.

When buying a rental property, consider both its potential for capital growth and rental yield. While cash flow is important, it's capital growth that helps you build equity and secure finance for your next investment. Invest in a property with good growth potential that will help you build your portfolio faster.

Mistake 4: Failing to consider rental viability.

Many investors focus solely on growth potential and overlook whether the property is attractive to potential tenants and will provide a solid rental return. Understand the demographics of the location and where the suburb is in its life cycle. A suburb undergoing renewal and regrowth is more likely to work in your favor.

Mistake 5: Letting emotions guide the decision-making process.

Purchasing a rental property is a business decision, not an emotional one. Don't let your emotions cloud your judgment or fall in love with the property. Choose a property that will be attractive to tenants, easy to maintain, and grow in value over time. Remember, this is about growing your wealth, not showing off to your friends.