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Investing Strategies for a Rising Property Market: Key Mistakes to Avoid

There can be a lot to learn when it comes to property investing. 

With so much to get your head around, it can be easy to make mistakes early in the investing journey.

There is still plenty of room for error even in a rising property market, as investing during these times can bring its own unique challenges.

But there is plenty of opportunity to invest during a rising property market. This is why it’s essential to learn how to manage risk, rather than avoid it completely. 

Let’s go through some effective investment strategies that will help you in a rising property market!

What do we mean by a rising property market?

A rising property market generally refers to a period where property prices are rising consistently. 

This is most often a result of demand for housing outweighing supply, which means that housing becomes more valuable.

This can be a positive thing for those already in the property market, as the value of their property will likely have risen.

But it can be a barrier for those looking to begin investing, as properties become more expensive to buy. 

This is why it’s important for new investors to carefully consider a range of factors when entering into a rising property market and avoid some basic mistakes.

For more of an understanding of the current and predicted climate, check out this video:

1. Making a move without doing the proper research

Knowing that you’re looking to invest in a rising property market is just the start of understanding market conditions and the various economic factors that should be involved in the ‘research’ phase.

It’s important to carry out thorough research on not just the current market but also the potential suburbs where you’re potentially looking to invest. 

You need to know what to look for when buying an investment property.

There are around 30-35 data points, both quantitative and qualitative that we recommend considering when carrying out research. A few of these include: 

  • vacancy rates
  • capital growth
  • average vendor discounting
  • stock on markets
  • building approvals
  • online search interests, and many more!

All this research can be carried out over the phone or online, by calling a few of the agents in the area or the local council.

But having all this data is only the start. Don’t make the mistake of assuming you know what it all means. 

Interpreting the data is a skill in itself. For example, does the data suggest this area will grow in the long and short term? 

Not conducting proper research and analysing the data correctly can be a costly mistake for many first-time investors.

2. Not knowing what your plan is

Knowing how you’re going to navigate a rising property market is critical.

This comes down to having a solid plan in place and setting specific goals before entering into the market.

Some of the questions you might want to have answers to before investing include:

  • Where do I want to invest?
  • What type of property am I looking to buy (house, apartment, townhouse etc.)?
  • What strategy will I employ? Am I looking to hold the property and increase its value over time, or am I looking to sell quickly?
  • What is the strategy if the rising property market is a housing bubble and bursting could lead to a decline in value?

And this is only the start when it comes to forming that plan. There are plenty of things to consider and be sure of before investing.

3. Focusing on the interests of a tenant

When choosing a property, it’s also important to think about what a tenant would likely rent in the area.

If it’s a big family home, it’s important to consider proximity to schools and early learning centres. Small apartments would likely be best matched with public transport for the single, working professional.

But caring for the tenant’s interest doesn’t stop there.

Let’s say you’ve bought a house in a rising property market. 

It’s now critical that you manage cash flow from the property to ensure that you manage the higher financial obligations.

This means securing the income generated from the tenant and minimising the vacancy rate of the property.

It’s a common mistake for investors to prioritise their own needs over the tenants.

A tenant’s issue with the property should quickly become your issue.

It would be a mistake to delay the tenant’s request or requirements in managing the property, as this can lead to them not extending their lease and higher vacancy periods. 

Remember, don’t lose income by not thinking about the tenant’s concerns. 

4. Not buying the right property

While it may not be as simple as ‘right’ or ‘wrong’, there are a couple of very big mistakes that can be made when choosing the property.

The first is buying property, or even choosing to invest/not to invest, based on emotion rather than analysis of the data. 

Being a good investor means taking heart out of the decision and making a call to purchase based purely on those key data points mentioned. 

Don’t let sentiment or the advice of a loved one sway you one way or the other. 

Don’t let the aesthetic appeal or superficial factors, such as proximity to your home distract you from the property’s potential for growth. 

Advice on buying an investment property should come from experts and property courses, rather than an uncle or aunt. 

But don’t go for anything unless the data points to potential!

5. Don’t go outside your means

Yes, there is money to be made in a rising property market. 

But it’s really important that you are in a position to invest before making that purchase, especially when property prices are high.

This means knowing your financial capacity and having an appropriate source of income to stay on top of mortgage repayments.

You should also ensure maintenance costs, bills, stamp duty, taxes, insurance fees, are all included in your calculations. 

Have an investing limit in mind, as well as an emergency fund for the unexpected and don’t go beyond this.

These are just a few common mistakes to understand and learn from in order to safeguard your financial interests and achieve success in real estate investment.

Employing these investment strategies can help you thrive in a rising property market.

PK Gupta
Published: 29 Oct 2023


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