With regards to property investment, there isn’t a mistake that hasn’t already been made. Most are made by beginner investors, who haven’t yet gained the experience to avoid them. These mistakes often stop investors from continuing after their first investment and becoming property millionaires.

Here are some of the most common property investment mistakes and how to avoid them.

Not knowing your objectives before you invest

In travel, if you don’t know where you are heading, or in short – your destination – how can you plan to go there? When it comes to investing, you need to be specific before you even begin. Know why you are investing and try to put together a timescale of your investment. Are you looking to benefit now, or in the future? Do you plan to sell your properties before you retire, perhaps to make a capital gain to meet other financial obligations? Perhaps you are trying to build a portfolio that will support you through your retired years? You need to answer these types of questions as they are integral in creating a property investment plan to get you to where you want to be in life.

Don’t allow your emotions to overrule your investment logic

When you buy a property or home, your emotions naturally kick in. For most people, you get that gut-feeling knowing that it’s the right property for you to live in. However, when investing in property, it’s a whole other scenario. If you allow your emotions to overrule property investment logic, you are almost certain to lose money.

Do not consider a property with emotional bias. Try to think of it as a money machine. Consider your investment objectives and ask yourself whether this property is going to help or hinder you in achieving your goals. Is it going to appeal to tenants, and will those tenants pay the required rent in order to make the investment viable? Will the property fundamentals support the investment in the long term? You should also research the location, find out how much rental income is likely, work out your cash flow and only if everything stacks up in your favour, should you invest.

Are you hesitant, or pursuing with too much haste?

This is often referred to as “foolishness vs. fear”. The foolish property investor acts in haste. Meaning that they don’t sleep on the decision or deal. They believe everything that the seller and/or agent is telling them, and then rush to seal the deal. This type of over-enthusiastic attitude will probably cost them money. Although in saying that, a rushed investment can sometimes reap great rewards. (Not often though).

On the other hand, though, there are investors who over deliberate. They have this huge internal fight racing around their head and hesitate before doing the deal and they hesitate some more and then some more. Before you know it, someone else has stepped in and snatched what would have been a great property investment right from underneath them. These types of investors will never overcome this fear. The often spend hours, days and sometimes even months or years learning the game, but never really play it.

You need to strike a balance between these two opposites. Up your investment education in order to get started, team up with a great property investment mentor who will hold your hand initially and take a leap of faith.

Doing due diligence incorrectly

First time buyers often make the mistake of buying a property at “bargain price”, only to out the property on auction only a few months later. It has failed to give the investor the return they had hoped for, and they are now desperate to sell and cut their losses. They worked out their numbers and projections on the back of an envelope and didn’t do their due diligence before buying.

If you are not doing your due diligence correctly, you are far more likely to pay the wrong price or buy the wrong property. Before investing, you must know where you invest and what type of property to buy. You'll need to work out a cash flow and be confident that the property will produce what you expect it to. You should also speak to local letting agents (more than one) to be sure of the area in which you’re buying. Do all your property fundamentals – shops, schools, transport links, major employers and major investments. Do they stack up? With all of this in mind, work out a two-year cash flow and do not forget to factor in void periods. You should also allow for bond increase rates, just to be on the safe side of your finances.

Getting poor financing

One of the most incredible benefits of property investments in that you get to invest with borrowed money. Using a bond or mortgage to fund your property investment allows you to profit from other people’s money. This could massively boost your returns and yield on your capital investment (the deposit). However, if you get the financing wrong, though, your profit could disappear.

When you invest in property using a bond, the interest payments are more often than not, your greatest monthly outlay. This is why it is vital to get the best possible financing. However, it isn’t as simple as getting the lowest interest rate. There are many factors to consider. For example – if you are wanting to sell or restructure your bond in the next couple of years, the savings from a lower interest rate could quickly unravel with early repayment charges. To get the best possible options to suit your requirements, you should always speak to an experienced buy-to-let broker as they know the market extremely well and can help you in avoiding costly financial pitfalls.

Poor financial management

When it comes to investing, it is a good idea to consider help with managing your property investment finances. There is the income (rent), expenses (bond repayment, maintenance, repairs, investment property charges etc.) that you will receive and have to pay. There will more than likely also be tax payable, and getting into a mess with your property investment finances could mean you having to subsidise the bond from your own personal resources.

You should always protect your cash flow by setting up an emergency or reserve fund. This way you’ll be prepared for anything, especially if your investment does suffer a short term shortfall in rental income. Also, it is advisable to get a good accountant to help you with the tax side of things. Make sure that they are experienced with accounts specifically for property investors, so that they know how to minimise any tax liabilities.

Thinking that you will save money by managing your property yourself

Only one you have invested in a property does the hard work actually begin! You’ll have to find and vet tenants, make sure that they pay their rental monthly, and keep up with maintenance issues. You’ll need to organise professionals to attend to any repair work and keep all the paperwork in order. You’ll also have to make regular property inspections and maintain an updated inventory list.

This is often easier said than done. Managing a property can be hard work and managing a portfolio is like a full-time job. You may think that you’ll save money by managing your investment properties yourself, but this is not the case. With one (local) property, you may save a few quid, although this is rarely the best place to invest. The question is, what happens when your property portfolio grows and is geographically dispersed? By having a great investment property manager from day one, you’ll be able to enjoy the benefits f investing property, and let them deal with the day-to-day hassle.

We all learn from mistakes, but it’s less costly to learn from other’s mistakes. If you follow these guidelines, you are less likely to make these common mistakes in property investing and you should be able to achieve your investment and lifestyle goals earlier than anticipated.