5 Mistakes to Avoid When Investing in Property


If you’re new to property investment or even if you’re a seasoned expert, it’s easy to make mistakes. There are plenty of different scenarios out there that can turn what was originally a well thought out investment with strong returns, to a huge liability that loses you capital.

This short guide below aims to outline and give advice to people planning to invest in the property market or enter any form of buy-to-let scheme. There are a number of horror stories out there of people who made the following mistakes and instantly regretted them.

Using a well thought out plan and strategy you can avoid some of the bigger mistakes that others have already made before you.

Not Researching Correctly

One of the biggest mistakes a lot of property investors make is not doing the correct research, whether if it’s because its not deep enough or incorrectly conducted this can have a huge impact. Lack of research or correct research can result in the potential purchasing of a property with fundamental and irreversible flaws. It doesn’t matter how amazing your newly purchased and improved student accommodation is if your cities University only has 1000 students enrolled it won’t matter.

You have to think about this as a long-term investment, which is what it is, but one that isn’t 100% secure. Many people fall into the trap of thinking that investing in the housing market is a dead-certain way to get a strong rental yield and that they’ll instantly start making money, no matter what.

Taking the time to do in-depth market research is so important. Not only can you avoid future problems but, you can potentially find the best deal for your money.

But it’s not just those new to property investment that can get caught out. Even people who have been in the game for years can grow comfortable and overlook some minor details that turn out to be really important later on down the line.

All this being said, sometimes the best option is to get an expert opinion. There are plenty of property experts up and down the country, however, if you are new to property investment or working with a smaller budget, the north east of the UK is a good place to start. Properties in the north east are currently some of the cheapest in the country with strong returns on investment.

Here are some starting points of research to help get you started:

  • Prices of other properties in both the immediate and larger area.
  • The average time it takes to sell a property in that area.
  • How many properties in the area are vacant or uninhabited? Is there a government scheme to fill these houses?
  • Surrounding businesses, are there any that might cause you problems or give the house additional value?
  • Check out any nearby planned construction projects

Making Emotionally Charged Decisions

An easy mistake to make for those new to investing in property. You might personally love a property because of how it makes you feel, or you see the potential it has for your own personal uses during ‘void’ periods when it has no tenants.

It might just seem like a harmless benefit to buying the house but, in fact, if you become emotionally invested in a property it can be hard to walk away if the numbers don’t make sense. You have to make the conscious decision that this is primarily a financial investment and anything else it might bring is an additional extra.

Whatever you do, avoid investing in ‘potential holiday homes’. These have poor yields and require huge amounts of maintenance. Feel free to buy one for personal use but, don’t confuse this with a promising buy-to-let property investment opportunity.

Not Taking into Consideration your Own Personal Circumstances

Never, ever bite off more than you can chew. Property investment takes a lot of work and overestimating how much work you can put in on a regular basis can be hugely detrimental. If you plan on leaving the country in the future and becoming an expat then property investment might not be the best idea. While retiring over-seas and living off of the proceeds might seem appealing, you need to be in the property’s immediate vicinity in case of problems.

There is no problem with investing in a property a few hours drive away, so long as you are comfortable keeping an eye on it from a distance. Tenants, especially if you are investing in student property, are more likely to treat your property with more respect if you show that you are going to be personally hands on and pro-active in its upkeep. Building a relationship with your tenants can go a long way, they might even recommend others to your property once they leave.

Even if you have a professional service or estate agent responsible for sorting out any property issues, personally contacting the tenants goes a long way. It also gives you the opportunity to keep an eye on any agent you might be employing and make sure they are doing the job properly.

If you fail to take your personal circumstances into consideration, then the above might not be possible. While this might not seem like a huge issue, it does put you at a huge disadvantage and opens the door for any profit you make from your investment to slowly bleed away through various avenues you are unaware of.

Strategise your Financial Plan

This might seem like it should fall under the ‘Not Researching Correctly’ section but, this is, in fact, a whole other mistake that people make. You could do all the research under the sun on the property you want to invest in, it won’t matter if you don’t have enough money to see the project all the ay through to the end.

Like with anything, property investment has a huge number of unexpected costs that you can never prepare for. If you budget directly to the T without consideration for the future or any possibly occurring issues, you’re going to be in big trouble.

Sit down with an expert and go over your financial plan. Some of the best buy-to-let projects come with huge arrangement fees and hidden costs, it’s important you arrive as prepared as possible.

You need to be able to allocate money for all your monthly mortgage payments with an annual fund allocated to fixing any problems that might arise. Just don’t be greedy, if you need to, invest in a cheaper property that you can securely finance rather stretching yourself to thin with something more expensive.

Know the Potential Problems with Buy-To-Let

Staying up to date with the news is essential. You cannot afford to be lazy when it comes to being aware of changes to the law or property market that might impact you. If you get caught unawares in the middle of a market crash or miss a minor change in the law, it could be monumentally catastrophic.

Make yourself aware of the things you should be keeping an eye on in case you need to cut your losses and sell up quickly. Additionally, things like mortgage rates are certainly needed to be taken into consideration, what would you do if mortgage rates rose? How will you handle things if you can’t find a tenant for a while?

These are problems that, while might impact you financially, need to have practical solutions. Sit down and come up with potential solutions to all of the could-be problems that might occur.

You can read about all the rules to do with tax here.