Last Updated on January 23, 2025 by Tanya Janse van Rensburg
Want to become a property investor?
It’s a pretty clever way to make money.
Get yourself a portfolio, buy low and sell high, and get a few long-standing tenants to pay your rent month after month.
Sounds simple and effective, doesn’t it?
A new investor can encounter many issues when buying real estate for the first time.
Investing in the housing market is only an intelligent money-making venture when you’ve researched and understand what can go wrong.
All investments carry risk, and you can never say you’ll make good money here!
But the clearer a head you go in with, the better your strategy will be.
Because of that, we’ve listed some of the most common problems a property investor can encounter.
Please take note of each of the following, as they could make all the difference between what you invest in and what you get back from it.
Every property owner needs to have an investment strategy.
Without one, you’ll waste a lot of resources trying to make money off of any property that crosses your path, and you’ll never have a real vision of what your portfolio needs to look like.
Of course, a diverse portfolio is always best, but you need to have an idea of when and how you’ll diversify.
Whether it's residential or commercial, buy-to-let versus buy-to-sell, or a mixture of everything, this takes some planning to execute properly.
That’s why you should never invest on the fly, as it will lead to ping-ponging, with you chasing your tail to try and make a profit.
Ping-ponging in this manner will also make it difficult to extract the real value from your properties; you’ll never have time to focus on making each one the best it can be.
If you see a property for sale and the asking price is not within your budget, it’s tempting to call the real estate agent immediately and buy it.
The property is there and waiting; you can do whatever you want.
What could make this a wrong decision?
A lack of research. You need to know where you’re buying, the previous owners, and any trouble the property has been through since it was first constructed.
You could otherwise be in for a nasty surprise, especially if it’s an older property you’re interested in.
It is tempting to grab a good deal as soon as you see one, but you should always take your time and research the background.
Wasted money is wasted money, even if you don’t lose as much as you were worried you would.
This is one thing to be very mindful of.
Any property you buy to sell again will have a value ceiling based on its location and the properties around it.
Even if you do it up and renovate everything in the house to have all the latest mod-cons, this could all be a waste of time and money.
Because even though a loft conversion could increase the value by 20% (at the least), if there’s no more value to be found in the property, that doesn’t increase your sale price.
That’s why you should always be wary of putting too much work in too quickly or selling when you’re not sure what the average price in the neighborhood currently is.
You can’t go above this amount or too far above it, and if you make a habit of buying without being aware of the value ceiling, none of your investments will ever hit their true potential.
That’ll lower your yearly income than many other investors in your area.
Investing in property is not a cheap thing.
Most people have to take out mortgages to afford the house they live in, so clever budgeting is essential when it comes to property investment.
That makes it very easy to run out of money when you’re not careful.
Always know what you’ve got in the bank.
Track your expenses and never go a day without checking how viable your budget is.
If you’ve hired a property management company to take care of your portfolio, you should also be able to rely on them to track your cash flow accurately.
Similarly, always be aware of what loans you can get, as not all property investors are eligible.
Indeed, for investors looking to rent out their properties, portfolio mortgage lenders can be a reliable first port of call for funding.
However, those buying to sell won’t be able to enter the same agreement.
Once you’re interested in a property and want to buy it, you must work to ensure you’re getting the valuable bricks and mortar you’re being promised.
Trust us; much work goes into determining the offer's value!
Surveying work needs to be done on all levels and across the land.
You’ll likely have to submit an offer before the seller allows you to undertake this kind of work, as this guarantees genuine interest.
Once you do, don’t waste time getting the approval you need.
During this time, you should also investigate how the building is connected to local sewage drainage and the power grid.
You need to know if costly renovations are in your future there.
After that, assess the property's energy efficiency and whether or not it will cost you in the long run.
Finding and securing good tenants can be challenging if you want to become a landlord and rent out any property you invest in.
Once they’re in the property, you may feel safe about the income you’ll generate, but even a long-term lease could fall through for various reasons.
Tenant screening helps landlords trust the people who call their properties home, but even this is not foolproof.
Circumstances change every single day, and staying aware of this will make it far less of a blow if a tenant issues notice that they need to move out.
Similarly, if rent prices rise and you want to keep in line with the average, what was once a reliable tenant could suddenly need to find a new place to live.
Keeping this price in line with what’s expected in the area and trying to match the expectations of the kind of tenant you’re trying to attract can make setting a rate that works for everyone easier.
Following on from our point about tenant troubles, being the best landlord you can be will take a bit of practice.
It is a worthy pursuit, however, as it ensures you retain a paying tenant that you’ve never had cause to complain about in your property.
It also makes it easier to attract more tenants in the future, as word-of-mouth marketing about landlords tends to spread quickly.
Marketing yourself is part of the battle of making money through property investment, and actions tend to speak louder than words.
Be reliable, always reach out if your tenant needs you, and don’t put off maintenance or repair work.
You’ll also want to lay out clear expectations regarding tenant behavior when they’re on the property.
This will give you more of a legal footing, just in case.
No investment is guaranteed. Even tangible assets like property can cause you to lose everything.
That’s why starting low and slow is essential, and deciding on the strategy you’ll follow early on is good.
If you don’t, you could spend too much, buy a property that won’t work for you, and end up with a low-value portfolio that’s hard to shift.
Finding and retaining good tenants can be challenging if you're considering becoming a landlord soon.
So, what to remember?
Get used to what the market needs, keep an eye on the trends, and never rush into a decision.
Don’t let the pressure get to you, and learn to say no - not every property needs to be snapped up, as FOMO is an unreliable feeling for managing your finances!
In conclusion, successful property investing requires careful planning and research.
With these tips, you can navigate potential pitfalls and make informed investment choices.
