Common ways property investors become financially stuck

Property investors are becoming stuck after making the wrong decisions, experts say.

The number of property investors are on the rise in Australia. But not all investors start out on the right foot. Here are some common ways that property investors come undone.

BUYING WITH EMOTION

While buying a home can be a highly emotional experience, buying an investment property should be more like a business decision, says PIPA board director and founder of ASPIRE Property Advisor Network Richard Crabb.

“Too many investors buy with their hearts and not their heads,” he says. “What we often see is that emotion clouds judgement.”

Propell Property managing director Michael Pell says a common way this plays out is when people buy in their local area simply because they have an attachment to it.

“It may be a beautiful place to raise kids and have a family but it doesn’t always make sense from an investment point of view,” he says.

Crabb says to avoid this trap, investors should replace emotion with data and “focus on the fundamentals” of “population growth, infrastructure, employment and yield – not just lifestyle appeal.”

Buying in your own suburb may not be a wise investment. Picture: NewsWire/ Nadir Kinani

BUYING WITHOUT A PLAN

Usually, when you invest in any sort of asset, it’s to fulfil a purpose. You might be buying an investment property with the view to buy a home in a few years. You might want to build a portfolio, or you might want to create a passive income for retirement. In any case you will need a well thought out plan. The problem is, a lot of investors rush in and buy a property without one, Crabb says.

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“They don’t know what success looks like,” he says. “Is it income? Is it growth? The right investment property is the outcome of a plan and not the starting point.”

He suggests taking the time to map out a strategy by looking at your goals and calculating what you need to achieve them.

PIPA board director and managing director of the ASPIRE Property Advisor Network Richard Crabb.

BUYING IN THE WRONG STRUCTURE

How you finance and purchase your investment property can have a massive impact on whether you achieve your goals, Crabb adds. Unfortunately, this is another area where many investors come undone.

“You may have bought a great property, but if you’ve done it in the wrong structure or if you’ve financed it wrong, it can actually diminish the returns,” he says. “If you buy it in the wrong entity or the wrong ownership structure you can’t change that without having to pay stamp duty and other costs, so getting the structure right is critical.”

He says it’s best to engage qualified professionals who can advise on property ownership structures that suit your goals as an investor.

Propell Property managing director Michael Pell.

SELLING AT THE WRONG TIME

Sometimes it can be frustrating as an investor. You might buy a property and end up with difficult tenants. Or the suburb you bought into might stay flat for a prolonged period. One other common way that investors come undone is to succumb to this frustration and sell up – only to miss out on the next growth cycle, says Pell.

“A great example of that has been Brisbane,” he says. “ The market was flat for 15 years before 2021, and then from 2021 to 2025 it basically doubled. But a lot of people sold in 2020 when Covid hit.

“They’ve made the mistake of not holding on for the long term and they’ve missed a four-five year bull run.”

He says investors are more likely to make better decisions when they have “an investor mindset” and remember that property tends to operate in cycles. It’s also important to have buffers in place and ensure you keep good tenants in the property.

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