7. POOR CASHFLOW MANAGEMENT
It’s easy to fall into the trap of poor cashflow management as a beginning investor.
Understanding all of the costs involved in acquiring and holding property can be difficult and you should always seek the advice of a professional accountant who knows about real estate investment to ensure you know exactly what you’re getting into financially.
You also need to make sure that you can afford to hold onto any property you buy.
In other words, how much income will your investment(s) generate and will it be enough to cover your outgoings?
If not, can you manage any shortfall?
Don’t forget to account for any contingencies, such as extended vacancy periods or unexpected maintenance costs.
A good rule of thumb is to allow about 10% of the property’s value for costs such as rates, land taxes, insurance, maintenance and management fees.
It’s great to dream about the riches you can make from real estate, but it’s critical to enter into property investment with your eyes wide open when it comes to all the out of pocket expenses you’ll incur along the way.
Examine each potential investment analytically and ensure you make adequate allowances.
By underestimating your income and overestimating your expenses you’re more likely to avoid any nasty surprises.