Common property investor mistakes to avoid!
There are lots of things to remember when you're a property investor. From interest rate changes to the ups and downs of property prices, it's important you remember a few key things to maximise the value you get from your investment properties. In this article, we share a few of the common mistakes you should avoid when it comes to property investment.
Not prioritising your debt
There are some types of debt you should pay off as quickly as possible, such as credit card debt. Other types of debt may provide you with a tax deduction, such as loans taken out to repair or improve your investment property. It's wise to pay down any debt that won't contribute to a larger tax return quickly. You can then start paying off tax-deductible debt when you can. Make sure you speak to a financial adviser so they can assess your unique situation and help you decide the best order to pay down your debt.
Forgetting to claim depreciation
A common area where property investors fall short at tax time is maximising their depreciation deductions. When done properly, maximising your depreciation claims can add thousands to your tax return. If you don't have one already, make sure you get a depreciation schedule drawn up for your property to maximise your deductions.
Not increasing rents
Many property investors fall into the trap of no increasing the rental price when renewing a tenant’s lease. If you do this, you can end up in a situation where you need to increase your rent by at least $50 to catch up on past stagnant rent prices. When your leases come due for renewal, consider increasing the rent by $10 or $20. These small increases are more palatable tenants, and your rent will grow in line with market growth.
Leaving your property vacant due to high rent
Just a week of vacancy can undo any of the gains you might have seen through a lofty increase in your rental prices. Be smart about the prices you set for your rental properties and talk to your property manager for their recommendation. You'd rather have a tenant locked in quickly rather than having your property sit vacant and losing money.
Managing your own property
It can be tempting to think you can manage your investment property yourself. However, there are hundreds of little tasks and processes that go into efficiently managing a rental property. Leave the management of your property with a professional so you can focus on your investment strategy.
With so much to think about as an investor, it can be difficult to see where you may be making some common investing mistakes. Being mindful of the pitfalls above can help you become a better investor and make sure you're always prepared to capitalise on new market opportunities.
Remember, this article does not constitute financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.