How does one avoid all the pitfalls that await the un-initiated in property investment?
By Neil Vorster
When one decides to begin investing in property, the general way it is done is through the advice of a friend, or a book you read. The, I am aghast to say, with minimal knowledge, people just go for it !
They look around with scant property knowledge, minimal vision and no clear strategy and buy something. And it often goes wrong rapidly.
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As I have said over and over, “the biggest risk in property investment is the investor himself”
He buys the wrong type of property, in the wrong area, for the wrong price, manages it badly and the when it all goes wrong, he calls property investment a bad idea!
In my case, when I ventured into property investment back in 2001, I had about 14 years of experience in various aspects of commercial and industrial property, but virtually no residential property investment experience.
I didn’t give coaching a thought ( it wasn’t locally available anyway), read a book or two and ventured forth. I suspect that even if coaching had been available, I thought I knew enough and would have scorned the thought of a property coach.
I had no idea how much I needed one!
Things went very well initially and thoroughly exceeded all my expectations! I was astounded at how effective property investment was as a wealth creation mechanism.
However, had I a coach, I would have avoided two of my biggest mistakes, which together cost me more than R 1 million. I will unpack the mistakes here in the hope that you, the readder, don’t repeat the same mistakes.
Property investment mistake #1
Thirteen years ago I bought a townhouse in the North Western suburbs of Johannesburg for R 150 000 and sold it for R 180 000 two days later. I wanted R 30 000 for personal reasons and thought that this was a perfect solution. I therefore sold the property and turned a profit of R 30 000 in 2 days without any capital outlay! I was elated!
It was very exciting, but nevertheless foolish. I dined out on the story for years before the folly dawned on me.
A property investment coach would have stopped me selling it and showed me how to obtain secondary financing on another of my properties. This would have saved me the tax on my profit, cost me a measly R280 per month in cashflow and today I would still own the R700 000 property, with the bond paid off.
I will say it again – That property is now worth R 700 000. That little mistake, which I only realised a few years down the line, has caused me to leave R 700 000 on the table.
Property investment mistake #2
On a bad day at the office, and in need of some retail therapy, I took the afternoon off work and went shopping for a buy-to-let investment. I had been thinking about owning a unit in a retirement village in Linden, so off to Linden I drove –
That same afternoon, I found a unit, called the agent who happened to be available, and bought it on the spot. In my enthusiasm, I overlooked the small “problems” which came back to haunt me later. It was an upstairs unit, in a retirement village, with no parking at all . All car parking was limited to outside the complex on the street: Which is not acceptable at all in crime ridden Johannesburg!
The parking problem was easily solved (or so I thought). The seller had entered into a lease arrangement with one of the other owners, who had no need for their garage. I took over the lease and was very happy with my purchase.
The fundamental flaw, easily identified by an experienced and unemotional property investment coach, was my reliance on a short term rental solution to a long term property owning problem.
A few years later when the garage owner died, his estate sold the property and left me without parking.
My target market for tenants had now drastically shrunk.
I now needed to find an elderly person, with no car, and fit enough to handle living upstairs.
I eventually rectified my mistake and sold it for a small profit to my tenant. Had I rather bought a ground floor unit with parking in the same complex, I would have paid a bit more initially, but now I would have at least R 400 000 in equity in that property.
Another R 400 000 left on the table!
The moral of the story, is that in just these two examples, you can see how a property investment coach would have saved me over R 1 million. (Bear in mind I am only exposing my two biggest mistakes here. I have made plenty smaller ones, but I trust, my point is made.)
I have heard literally dozens of “I have been burnt in property” stories, and almost without exception, the mistakes were entirely avoidable!
How does the un-initiated at property investment avoid these pitfalls?
At Organic Growth we offer property investment coaching to steer investors and prevent them repeating these costly types of mistakes.
If you are interested, please click below to see more details, and feel free to pass this on to a friend who may be new to the property investment business.
You may save him loads of money!
click here for Property coaching information
Don’t get burnt – Get a coach, and avoid the mistakes I made!