5 WORST INVESTMENT PROPERTY NIGHTMARES
And how to make sure they never happen to you
It’s no secret that property investment can be risky, but the old adage is true; the higher the risk the higher the return, which is exactly why so many people continue to venture down this path. Unfortunately, many Australians are hastily jumping into property investment only to find themselves in disastrous situations as a result of cutting corners and poor planning, and are then forced to sell early as a result. It generally takes five years to start seeing progress on your mortgage, yet as many as one in four Australians sell their investment property within just one year of purchase. Selling your property early should be the last resort if you find yourself in a difficult situation, and there are certainly proactive ways to avoid this happening altogether.
Investment real estate mogul, author and Dream Design Property (DDP Property) Founder Zaki Ameer has taken countless risks in order to build himself a successful portfolio of 10 properties totalling $3 million in just a few short years.
Since founding DDP Property, a wealth creation mentoring program that utilises Zaki’s remarkable investment methods and mindset to guide clients as they begin their own personal development and property investing journey, Zaki has seen it all. From minor renovation disasters to vital mistakes costing investors hundreds of thousands of dollars, Zaki has counselled countless people in the midst of investment property disasters on how to turn their situations around.
Zaki shares the 5 most horrific property investment nightmares and how you can circumvent them:
- Take ‘off the plan’ off your plan. Buying off the plan means purchasing a property that has not yet been built. This type of investment may seem enticing at first, as you will have a brand new property at the end. However, there is no guarantee of the quality or of the final property value, and they are often initially over valued by the developer. Before coming to me, a client had purchased a house off the plan for $750,000, but once construction was complete the property was only valued at $650,000. He was then forced to resell the property with a loss of $100,000! Avoid off the plan purchases completely.
- Jobless, down and out. Mitch* the proud owner of two investment properties when he lost his job within the first few years of purchasing them. As a result, he couldn’t keep up with the loan repayments, and applying for loan extensions cost him thousands of dollars in unforseen fees. Always set aside three months worth of mortgage repayments per investment property; this will give you a safety net to fall back on should your income flow change. It’s better to have this cash for emergencies than to use it to pay extra loan repayments.
1 http://moneyning.com/housing/the-five-year-rule-for-buying-a-house/ 2 http://news.domain.com.au/domain/home-investor-centre/stay-the-course-to-reap-rewards-20110430-1e1p2.html * Name has been changed to protect their privacy
- Nasty exit fees. The historically low interest rates have driven record numbers of investors to opt for fixed rate bank loans; making them privy to penalties should they make an early exit. An old friend of mine went through a traumatic divorce and was forced to sell his investment property during the fixed rate period, resulting in thousands of dollars in exit fees. Always keep careful records of the properties purchased so that you can avoid having to sell the investments on the basis of splitting assets through a relationship breakdown.
- Dodgy builders. Renovating can add big value to your property fast, but beware; it takes only one dodgy builder to land you in hot water. James* was renovating his investment property when one of the crew fell from the construction site and suffered severe injuries. The building company did not have insurance, trapping James in a messy lawsuit that set him back $150,000. I have also seen appalling renovations completed by crooked builders where roofs have leaked and caved in soon after completion, costing the owners $250,000 in legal fees and repairs. When selecting a builder, always check their current credentials and insurance policies, and inspect any other recent work they have completed.
- The disappearing tenant act. Sarah* had what she thought were problem-free tenants for a glorious nine months, until one morning she was told that they had deserted the house in the middle of the night. The abandoned property was left in appalling condition and Sarah, not having landlord insurance, had to fork out $20,000 to pay for repairs, whilst also having to cover rent during property restorations. Bad tenants are unfortunately common, which is why you should always invest in landlord insurance.
For more information visit www.ddpproperty.com.au