There isn’t one single strategy suitable for everyone when it comes to property investment. Choosing the most successful property investment strategy depends on your type of personality, skill level, risk-taking ability, time availability, and the financial circumstances at that particular moment. Looking to avoid making a bad property investment? Get in touch with Crash Realty today.

Here are the top 5 warning signs that a property is a bad investment.

Relying On Hotspots:

The majority of property investors invest to financially gain from the process. If you invest in a suburban property that’s on the verge of a boom, you are more likely to make a good profit in a short period of time.

According to Australian architect Michael Yousef, it’s all about prior research. “You don’t magically just stumble upon an area that’s on the verge of booming. You don’t want to be joining the race at the back of the pack and fighting for everything, you need to know what areas are on the brink and get ahead of the chasing crowd.”

When there is more demand for the property, real estate markets can grow at 20-30% per year and a herd mentality appears as a result. The most important thing is to pick that hotspot in advance before things start to become too competitive. You can make a fortune when you get it right and watch your investment depreciate over time if you get it wrong.

Rental Guarantees:

Many property investors fear that they may not get a tenant or the tenant may not pay the rent on time. Hence, when a property for sale offers a guaranteed rent for the next couple of years, they grab the opportunity with both hands.

One Industry Towns:

The location of your property plays an important part in determining how the property will perform in the long run. Consider how a location is likely to perform in the short and long terms to make the correct decision when investing in real estate.

For Leila Maminezhad, the founder of a corporate cleaning company, setting up shop in a one industry town is never a good start. “If a town relies on something for business, you’re not going to get many people interested in your property. It’s definitely wise to steer clear of investing in these types of towns unless there’s a drastic change in terms of what drives their local economy.”

In fact, property is typically a long term investment involving high purchase and selling costs. But there are certain risk factors that may cause it to change. If the property you plan to invest in is reliant on one main industry like tourism, mining, government, or manufacturing, it is more likely to carry more risk compared to a property that has multiple industries supporting it.

Sold Predominantly To Investors:

Whether you plan to invest in brand new or second-hand properties, there are areas or buildings that have investors, owner-occupiers or a mixture of the two in them. You need to look for a better deal when investing in such properties.

Large Gap Between The Price Of An Equivalent Second-Hand Property:

If your property investment strategy is based on investing in brand new properties, it can be difficult for you or even a valuer to calculate the value of the property. Just because there are other properties sold in the region, it doesn’t mean your property is worth that amount. The other investors could have been unprofessional amateur investors who assumed they were buying well.

Telecommunications mogul Neil Royle, who has Bachelor of Architecture, explains that oftentimes if an existing home structure is several decades old, it may be worthless.

“If you’re looking to purchase an existing home with the intention of renovating you should first do a valuation to determine if demolition or renovation is a more suitable choice” explains Mr Royle, “The best way to find out the value of the existing home structure is to look at recent sales of similar homes in the area then compare this value with the cost of similar vacant lots in the area, the difference will give you a rough estimate of the structure’s value”.

Mr Royle explains that the closer the recent land sale values are to recent house values, the more you should think about demolishing the existing house structure instead of renovating.

“You can speak with an architect or use a construction cost calculator to estimate the cost of a rebuild easily” suggests Mr Royle.

Crash Realty never enforces lock-in Management Agreements because we know how much you value service. Get in touch with the team today to learn more about property investment.