NaN% completed
Loading page...

10 mistakes first-time property investors make

March 4, 2019 9:00 am by Upside

When it comes to buying an investment property, knowledge is power. Speaking with experts, doing your own research and choosing the right time to invest and sell are critical to making your property investment a success.

But despite the wealth of information out there, there are still plenty of common mistakes that first-time property investors fall prey to. That’s why most investors start out with the intention of growing a successful property portfolio, but few reach the top rungs of the property ladder.

We’ve put together a list of 10 common mistakes property investors make so you can recognise and avoid the pitfalls ahead of time.

1. Making decisions based on emotion rather than logic

When buying a home to live in, it’s understandable that emotions will come into to play as this is the place you’re likely to raise a family or live comfortably in retirement. When it comes to investing, however, letting your heart rule your purchasing decisions means you could be seeing a potential property through rose-coloured glasses and not accurately evaluating its fundamentals. First-time investors should always buy property based on analytical research about the market and the property itself – not personal feelings.

2. Lack of reliable research

It’s all too common for first-time investors to rely on a single source of information like a property investment company to tell them when and where they should invest, without verifying what they’ve been told. It’s crucial to double-check research and seek out multiple sources of price data and suburb information to ensure you’re using solid, reliable research to make investment decisions.

3. Overborrowing

Despite the APRA’s crackdown on interest-only loans, many first-time investors still fall into the trap of borrowing at their maximum capacity, which leaves little wiggle room if financial circumstances change. Ideally, you should have a safety buffer in place so that you can still comfortably afford to make mortgage repayments and won’t have to eat into your savings if your situation changes.

4. Wanting to ‘make it rich quick’

Expecting short-term gains in real estate is more about speculation than strategic investing. Investing in property lacks the liquidity and volatility of other investment options like shares, which is why it’s a safer bet long-term, but also why you shouldn’t expect investing in property to make you an overnight millionaire.

5. Buying in the wrong location

You might have found the ideal investment property with all the right features, but if its location leaves a lot to be desired it probably won’t be an attractive option for prospective tenants or buyers. Making sure a property is in a good location with solid infrastructure like transport, shops and schools nearby is just as important as making sure the property itself ticks all the right boxes.

6. Poor cashflow management

It’s easy to fall into the trap of poor cashflow management as a new property investor. That’s why it’s crucial to understand all the costs involved in buying and holding a property, which go above and beyond just the mortgage payments. Repairs, council rates, gaps in tenancy and so on can all impact your bottom line, so make sure the income generated from the property can cover all your outgoings, and if it doesn’t, that you can manage the shortfall.

7. Failing to budget for rate rises

Although home loan interest rates are currently low, the market could shift at any time – and a rate hike could leave you with significantly higher monthly mortgage repayments. Make sure you can reasonably afford your ongoing repayments even if your lender was to increase your rate down the track.

8. Not taking advantage of tax benefits

It’s a common misconception that the rental income for a property should match or exceed the cost of mortgage repayments. While this is true to an extent, remember that if your property is negatively geared i.e. the rent isn’t covering the home loan repayments, you can claim a portion of that expense at tax time. Also speak to your accountant to make sure you’re claiming all the legitimate tax deductions available to you, such as costs of any repairs, council rates and strata charges.

9. Relying too heavily on rental income

Many investors buy property with the mindset that rental income is all that’s needed to cover the costs of an investment property. However, if rates change or you can find a tenant for an extended period, those extra costs will be coming out of your pocket – so only borrow what you can reasonably afford without having to rely on rental income.

10. Not knowing when to sell

Pinpointing the right time to sell a property can give you the freedom to change and ultimately grow your investment portfolio – but many investors don’t know when the time is right. As with any property-related decision, choosing the right time to sell comes down to doing your research and seeking advice from the experts. For more information, read our tips on how to sell your investment property in Australia.

More on this topic:


Upside is an Australian-owned, full-service real estate agency with one low fee and no commission. Our standard is other agents’ ‘extras’, delivering vendors a complete agent managed service including a full appraisal, open home management, copywriting, photography, signage and advertising. It's the way real estate should be.

The market may be turning.
Find out the value of your property.

Get a free online property report from Upside Realty.
It takes seconds.
Upside property report preview