Real Estate Investment:Today

3 mistakes of a different kind that will sabotage your investing

There are plenty of mistakes that novice property investors make that can derail them.

These can range from simply buying the wrong property for the wrong price to not having any rainy day money in their kitty (a buffer).

However, here are three mistakes that are a little more tricky to overcome because they are to do with our emotions, our mindset and some irrational thinking.

1. Buying in their backyard

Many beginners try and make their favourite strategy “fit” in their preferred investment location — whether it is appropriate or not.

This is a bit like trying to put a square peg in a round hole.

It’s important to understand that the location of your investment does the “heavy lifting.”

It will account for around 80% of your property’s investment performance.

For success, you must of course also buy an investment grade property in that location.

Yet many investors prefer to buy in their backyard because it’s their comfort zone. They feel they know their “market.”

But that’s not really true.

Knowing your neighbourhood is not the same as understanding the property market — in fact, it’s very different.

So rather than buying close to where you live, where your holiday or where you want to retire, which are all emotional reasons for selecting a location, select your investment location based on research.

Look for an area that has a long history of outperforming the averages, and one that is likely to continue to do so because of the demographics of the people who live there.

Square Peg In A Round Hole

Demographics is one of the biggest factors determining capital growth and I’ll explain a lot more about this in another rule.

Statistics show that some suburbs have 50 to 100% more capital growth than others over a 10-year period.

Obviously, those are the suburbs to target.

2. Being too emotional

I’ve said it before: sound property investment should never involve emotions.

It must be based on rational decisions and not one where your heart is leading your head.

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