The Biggest Mistake A Property Investor Can Make

For every property investment success story there are thousands of hard luck stories where the investment didn’t work out or, worse still, an investor ended up losing their shirt.

It usually comes down to making one big mistake.

Unfortunately this mistake can happen to anyone  in any country and in virtually any property market.

Take the story in the FT of 1,000 investors who were tempted by an offer that seemed to be just too good to be true.

They fell for the idea that they could secure themselves their own piece of paradise beneath the swaying palms and crystal clear waters of the Caribbean. Best of all, they only needed a small deposit.

This was because their pensions which were just sitting there and not doing anything in particular could be put to work to fund the investment. Simple idea  – use your pension, earn an income and cash it in when you’re ready to retire.

It was so easy for people to think that they had nothing to lose.

Such temptations can be incredibly enticing to us all. Who wouldn’t want a holiday home in the Caribbean?

This story is one of the classics we hear time and time again in the world of property investment. It soon becomes a sad one for investors who commit themselves to buying off-plan in an unfamiliar market that looked so enticing in those glossy brochures.

In the cold light of day it is easier to look back at mistakes made in property investment. Every experienced property investor knows that the words ‘holiday home’ and ‘investment’ don’t often make a good match.

It may be true that a holiday home in some of the world’s most exclusive locations will stack up but not where  properties number in the hundreds.

In these areas demand is often already satisfied and properties are more likely to stand empty for months or even years at a time and in the worst cases off-plan properties might not get built at all.

Living close to the beach in exotic locations is not practical for everyone, it is largely for retirees and the rich who can afford to have a property they might use only a few months of the year.

Making income  from rent and having an exit strategy are usually secondary considerations when it comes to owning holiday homes. They are a different type of investment altogether.

So the number one mistake any property investor can make is to not make the distinction between an emotional investment i.e. a desire to own a holiday property in a nice location rather than the less glamorous cash- flow properties that stand a better chance of generating the income to fund the kind of dream lifestyle we all would like.

Have you made a property investment you have since regretted? Please leave your comments below.

 

Kind regards

Loxley McKenzie
Managing Director

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