Buying a property is an emotionally-charged experience, am I right? Even experienced investors do admit to feeling nerves every time they enter into a transaction.
But for the not so seasoned buyer, buying property can be confusing, and for that reason can result in buyer’s remorse. The mistakes made during this emotional rollercoaster can be costly. Therefore it’s important to be aware of the traps to avoid a nasty aftermath.
1. Justifying overpaying just to get into the market
Talking yourself into paying more just to get into the market is an easy trap to fall into and is rarely a smart move. If you buy at the peak of the market cycle, not only are you paying a premium, you’re also buying a property that may have already experienced a lot of growth. You could end up holding an expensive asset that may be slower to appreciate in the years to come.
Remember that if you’re overpaying at the start, you’re already giving up some of your profit.
2. Being too optimistic about growth potential
Believing that property will always grow in value year after year is a trap that could lead you to make riskier deals.
While generally, property values have grown significantly over the long term, you can’t be certain that your property will keep growing in value each year. There will be years when it may be stagnant before it rises again. If you’re counting on your property to keep on appreciating in value and you base your strategy around this expectation, you’re exposing yourself significantly if a downturn hits your investments.
It’s also a mistake to assume that just about any property will see growth. A mediocre investment bought at the wrong time in the cycle at the wrong price and in a poor location is unlikely to make you big profit.
3. Being lured by very cheap properties
Cheap properties may seem desirable to buyers on a tight budget, but risks can come with such properties. It’s simple – if it’s that good a deal, why hasn’t anyone bought it before? There is usually a good reason why a property is available for an enticingly-low price.
When presented with a cheap property, find out why. Are there any problems or risks associated with it or with the local area? For example, the property may have structural problems, signs of pest infestations, it’s in a planned flight path or located in an area where a big employer is about to close down its operation. In these instances, vendors may be desperate to offload their properties.
The question you need to ask yourself is this – would I want to carry all these risks in return for the cheap price I’m paying for this property? The answer in many cases is no.
4. Getting too attached to a property
There’s a reason why vendors go out of their way to stage their homes during open houses – it’s to evoke emotional attachment from potential buyers.
The selling agent wants you to fall in love with the home. Once you’ve become so attached, they would have an easier job selling you the home at a premium.
Becoming infatuated with a property could also make you forgo your usual due diligence and rush through the buying process for fear that you might lose this deal. Being love-struck could also drive you to waive crucial conditions in the contract in a rush to make an offer. More often than not, those overlooked details end up costing you a great deal in the end.
Don’t let your ‘love’ for a prospective home rule you and make you lose your common sense. There are more properties out there for you to choose from than you realise. But it’s a lot harder to recover from a bad deal made in the heat of the moment.
5. Waiting for the perfect property
Hesitating to make a move once you’ve done your due diligence in the hope that a better property will come could cost you more than just time.
Dragging your heels can make you lose opportunities such as buying before the market takes off. The longer you wait, the higher prices could go and competition is likely to grow. By the time you’re ready to make a decision, the property has been snapped up by another buyer.
If you’re continuously waiting for the perfect property to come along, you risk never getting started and never reaching your goals.
Contact either Owun, Suzanne or Costa on 02 9517 1818 or email@example.com to discuss your options. Or, if you feel like dropping in at our office, we are located at Suite 106, Flourmill Studios, 3 Gladstone Street, Newtown 2042. Be sure to share our blog on Facebook and Twitter and let others join the conversation!