How to avoid a $265,000 mistake

Consider how you would feel if you bought a block of land for a seemingly great price, and spent all your savings in the process, only to find out you can’t build a house on it.
 
It’s the kind of scenario most of us contemplate when we’re considering investing. And while it’s an extreme example, it’s a cautionary tale of what can happen when we try and manage such a big investment on our own.
 
Let me tell you no one who finds success gets there on their own.
 
When starting out, it is unreasonable to expect that you will have all the answers you need to make a sound decision. I know I certainly didn’t, I relied on a core team to steer me away from some of the most common pitfalls.
 
I am a staunch advocate of the phrase we don’t know what we don’t know.
 
So where to start? Well, I would strongly recommend seeking out the following resources when considering making any type of investment.
 
I don’t think the Prasad family would have found themselves in this predicament if they had these resources behind them.
 
(Please note: this list is provided using a property lens, as that’s what I know!)
 
Find a Mentor
 
The best place to start is with a mentor – someone who has achieved whatever it is you are seeking to achieve, whether it be a friend, relative, or professional.
 
A mentor will help you avoid the mistakes others have made before you. They will save you time (and money), and ensure your experience is less anxious, particularly in the early stages of your investment journey.
 
To me, a good mentor is someone who has built up a portfolio of properties and continues to own them. If you’re going to be building houses as part of your strategy, ideally, they would have experience in that too.
 
Had the Prasad family had a mentor guiding them, they wouldn’t have found themselves in this unfortunate situation.
 
Broker / Banker
 
It would help if you had a banker or mortgage broker who could help you set up the right structures and borrow from the right lenders.
 
I use a mortgage broker and have done since day one. I prefer them because I find that lenders change their policies as often as I change my sheets.
 
The right mortgage broker will own property and has helped others build their property portfolios. Once again, if you want to build houses, then make sure your broker has a lot of experience in helping people set up loans for building houses.
 
My mortgage broker wouldn’t have allowed the Prasad family to settle on a block of land without having checked they had a building contract in place and finance for the construction costs too.
 
Property Manager
 
The mind boggles as to how many property investors try and save some money by managing the property themselves. In my opinion, the circa $50-per-week-saving is a false economy.
 
Managing properties can involve a lot of time and effort, not to mention a commitment to being on top of ever-changing legislation, and it is best left in the hands of a qualified professional with a good track record.
 
I get my property manager to pay all my bills (except interest on my loans) and send me the rent, net of expenses at the end of each month.
 
They also inspect the property every three months and send me a copy of the report (including photos). I read the maintenance report, so I am across everything that is going on.
 
Not only do I think it’s worth the 8 percent or so that they charge, but it is also worth paying a little extra for an experienced, thorough property manager who treats the property as their own.
 
Accountant
 
The final cog in the chain is an accountant. I use an accountant who owns investment property and specialises in tax.
 
There are plenty available who offer that level of expertise and save their clients thousands of dollars by knowing exactly what can be claimed as legal deductions.
 
According to the Australian Tax Office, 70 percent of Aussies do not claim all their allowable tax deductions. When it comes to property, there are a few different ways to run deductions – a good accountant will be able to establish the best method for you.
 
Make sure you look for an accountant who owns property themselves!
 
Investing always involves risk, but we can minimise it by surrounding ourselves with a team of experts.

Show me a successful person, and I will show you someone surrounded by a strong mentor. Show me a successful property investor, and I will show you someone with a team of strong mentors, as well as a broker, property manager, and accountant.