We’ve already looked at the issues of not being businesslike in your approach as a property investor and of not researching the area properly before you buy. This time we’re looking at the mistake of not setting a budget.

Whenever you’re making a property purchase, getting the finance right is crucial. In order to make it worth your while investing in property, the price you pay has to be within your budget and ensure you’ll make a profit if you’re going to do it up and sell it on, or provide a decent rental yield if you’re planning on renting it out.

If the figures don’t add up, or you over-spend to start with, you won’t make money on your property purchase.

It sounds simple, but some new investors still don’t set a budget when they first start looking for property. It’s easy to be swayed by nice looking houses in good areas, or get carried away at a property auction and spend too much, but you need to learn to follow your head more than your heart and think logically and sensibly about how much you can realistically spend.

So before you get carried away, do your research, check your finances, arrange a mortgage and get a budget clearly fixed in your mind. Then you just need to learn to stick to it!

For more details about the importance of rental yield, see
http://www.investment-properties-for-sale.co.uk/2010/09/what-is-rental-yield-and-why-is-it-important/

If you’re going to invest in property and make money from it, then it’s important that you treat it like a business from start to finish. This means that you may need to make decisions with your head, rather than your heart, especially when it comes to buying a property and furnishing it.

As is apparent all too often on popular property buying TV shows, the extravagant extra purchases or furnishings in investment homes rarely bring in extra cash, but they do cost you more. When you’re kitting out an investment property, it’s better to stick to the good quality basics that will last well, rather than worrying about spending your hard earned cash on super flashy fittings and fixtures that renters may not even want.

The same is true when purchasing a property too. If you’re going to be successful with letting out your property it needs to meet the needs of the rental market, be in the location that renters want to live and suit their budget. There’s no point in investing in a top notch, high end one bedroom apartment if the area is more suited to the family market of renters who want three bed semi detached houses.

From the outset it’s important to separate your ideals from the real market situation and treat property investing as a serious business. With the right business acumen, and a close eye on how the figures add up, you can avoid this common property investing mistake and be on your way to property investing success.

Here are five of the common mistakes made by first-time property investors.

1. Not choosing the right location 

Getting the location right for your property is crucial if you’re going to rent it out.

But new investors often assume they should buy property in an area they know, or get distracted by the look of a particular property.

However, there’s no point in owning a lovely property in an area where no-one wants to rent it, so you should abandon any pre-conceived ideas about where you should buy, and look to the market to find areas where people want to rent.

2. Not treating property investing as a business

If you’re going to succeed as a property investor, then you need to treat it as a business from the start.

Your key focus should always be on which property investments will give you the best capital growth and rental yields, and won’t cost you an arm and a leg in the first place.

3. Getting too emotionally involved in the property

If you’re going to make a go of it as a serious property investor, then you need to leave your emotions about a property behind.

It’s not going to be a house that you’ll live in, so there’s no point in getting carried away with interior decorating ideas or wanting to stamp too much of your personality on the property. You’re buying it to rent out, so it’s best to stick to neutral interiors and colours that will appeal to everyone, not just you.

4. Not using a property management company

Many first-time investors look at property management options and see it as an expense which they could save on.

However, it’s usually only a small fee, it’s tax deductible and you gain the huge benefit of having experts to handle tenant problems. With the best will in the world, not all rentals run smoothly all the time and it offers great peace of mind to have a company handling the rental business side for you.

Not only will they be experienced at dealing with tenant problems, but they’ll also have a maintenance team ready to handle leaks, repairs and unexpected problems.

5. Buying an expensive property

Would-be property investors may think that buying an expensive property automatically means they can charge higher rent and make more money.

Although high end rentals can work well when the economy is buoyant, it certainly doesn’t mean that you can make more money. You may well have to work harder to find the right tenants and they’re not a good option during an economic downturn.

In the long run, it’s better to invest in an average property, where they’ll be far more potential tenants, than splash your cash on a high end investment.