Four Issues for Homebuyers to Avoid

When a person sets out to buy an investment property , it can be a daunting and worrisome time. Although you may appreciate some of the benefits that come from owning an investment property, it can seem a huge financial commitment for a property in which you may never reside.

In order to enjoy successful property investment , there are a number of issues to avoid. With knowledge and understanding of these, you are best placed to avoid hardship, make a good decision and reap rewards from your property.

#1:  Assuming that interest rates will stay low

It is perilous to assume that interest rates will remain low. Unfortunately, it is an all too common mistake when property investors calculate their repayments and financial commitments based on an interest rate that is too low. Property investors need to understand that interest rates will increase and this reality needs to be factored into their calculations.

In addition, property investors need to factor in a buffer; a suitable buffer will protect you from too much hardship when interest rates do increase. In the event that interest rates rise rapidly, a property investor can face incredible financial difficulty – to the point that they may face loss of their property.

#2:  Overlooking the full costs of purchasing a property

Investors need to ensure that they appreciate the range of costs associated and incurred when buying a property. Individuals should be well aware of all costs, including but not limited to: mortgage insurance, stamp duties, rates and levies, body corporate or strata fees, valuation costs and even loan application fees.

Unfortunately, many people underestimate or do not factor some costs in at all and this typically results in frantic efforts to raise the additional funds.

It is important that investors understand that, in signing contracts, they are committing to pay for a range of additional costs. Investors should therefore enter into contracts with full and complete awareness of what they are committed to paying.

#3:  Acting upon questionable advice

Property investors should be wary when it comes to accepting and acting upon advice. History shows that you should be careful when listening and taking the advice of real estate agents and mortgage brokers when it comes to the purchase of an investment property.

For example, some real estate agents have convinced property buyers to forego longer financing periods in preference to short finance periods in the hope of securing an unconditional contract. However, many people would argue that it is preferable to have a longer financing period, of twenty one days or longer.

When embarking on property investment, you should ensure that advice and guidance is provided by a credible and trustworthy source.

#4:  Assuming finance approval

The only way to be sure about the amount of finance you can obtain and therefore the price of the property or properties you can afford is to acquire confirmation from your bank as to the amount that they will definitely lend you.

Too often, property investors are disappointed when confirmation of the finance they can obtain is given; it is not uncommon for the approved amount to be less than the investor expected.

Property investment can present significant financial commitment and subsequently, significant financial diligence. In order for property investors to have a successful experience, it is important that they have an accurate understanding of the costs that they will be required to fund and a clear understanding of what it means to own an investment property.

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