The most important reasons why investors lose money



  1. They go into rental property investment without enough money.

It is very tempting to buy a rental property when you have good equity in your own home and your bank is keen to lend you plenty.

Unfortunately for many new investors they buy a cashflow negative property and don’t have a plan for what to do when interest rates go up or the property is vacant for several weeks.

When they take out the new loan for the investment house they can afford the repayments but life has a habit of changing and in 2 or 3 years it might not be so easy.

Investors lose money when they have to sell on a declining market because they can’t afford to pay the loan any more.

  1. They buy without knowing what their tenants want.

Some new investors focus on what they like and what they would want in a rental property rather than finding out what their prospective tenants want.

Many buy without even knowing who their tenants are likely to be and end up with a rental which has a high turnover of tenants or is empty for many weeks.

Different locations have different tenants looking to rent and knowing what makes a property popular in that location is essential before you buy.

  1. They fail to keep up to date.

An investor needs to know what is happening in the location they own property in. What is the situation for local businesses and what are the plans for future development in the area?

If an investor loses touch with what is going on they can miss opportunities and overlook changes they need to make to ensure they are maximising their return.

They can also miss the signals which may warn them that it is time to sell up and move on. The internet makes it easy to stay informed if you make sure to put some time into it.

  1. They buy a cheap property.

It sounds crazy but more investors lose money by buying too cheaply than by paying too much. This is because they focus on the price rather than the reason for the price. If a property can be bought really cheaply there will always be a reason such as a lack of demand, a lack of tenants, a problem with the house or the fact that you are only buying the house not the land.

Before you buy an absolute bargain do your research thoroughly or you could stand to lose significant amounts of money.

  1. They don’t want to admit they made a mistake.

Big losses occur when an investor should sell up and get out but they can’t bring themselves to accept a loss. They wait and wait and then end up making a bigger loss and have months or even years of worries and hassles while they wait.

It is hard to accept you have made a mistake but it isn’t the end of the world and most people can learn from it and do a much better job next time around. Waiting for something outside of your control to change can be the most futile use of your time and money ever. Knowing when to hold and when to fold isn’t just a skill you should use when playing poker.

If you have a plan which ensures you avoid these mistakes then you have a much better chance of being a very successful investor. Good luck.

Robyn Forryan

Property Magic

0800 800455


Advising Auckland property buyers


About Property Magic

My business is called Property Magic and I work exclusively with buyers as a buyer's adviser. Why buyers? Because I believe that buyers have the right to be treated fairly and honestly when they are looking for a house to buy. So check out my advice and let me know what you think.
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