Purchasing a buy-to-let property and making a nice return on it, that doesn’t seem so difficult, does it?
You buy a property, spruce it up, rent it out or sell it and enjoy the returns.
Why would anyone need/want to read a list of common mistakes and tips on this matter at all?
How can anyone make an excessive mistake when investing in real estate? Right?
If only it were that simple… In practice, there are many different mistakes, lapses and errors that can derail your real estate investment.
And if you are not prepared, they can cost you a pretty penny to put right.
Below are some important tips on how to achieve financial success with buy-to-let properties.
You will also get a handy overview of nine of the most common mistakes that real estate investors make again and again.
At the bottom we conclude with some interesting passive yield properties for sale, including rental guarantees.
Table of Contents
- 1 Why do so many investors never get beyond their first property?
- 2 Purchasing a buy-to-let property: Tips
- 3 Nine common mistakes made by real estate investors
- 3.1 Not being financially literate
- 3.2 Being too afraid to invest | Purchasing a buy-to-let property: Tips
- 3.3 Trying to diversify too much and too quickly
- 3.4 Trying to outwit the market
- 3.5 Not having a system – Purchasing a buy-to-let property: Tips
- 3.6 Failure to evaluate the performance of your investment portfolio
- 3.7 Focus on your own backyard – Purchasing a buy-to-let property: Tips
- 3.8 Failure to take into account property cycles & market history
- 3.9 On the hunt for the next hotspot – Purchasing a buy-to-let property: Tips
- 4 Range of passive buy-to-let properties for sale
Why do so many investors never get beyond their first property?
In short, many investors make the mistake of buying with their hearts rather than their minds.
They omit the research needed to buy a property with the capacity to generate strong long-term capital growth, in favour of a very short-term vision.
However, a short-term approach is not the right one for creating a property portfolio for wealth accumulation.
You have to take a long-term perspective, make plans to succeed and keep the big picture in mind.
Buying property without first understanding certain key investment elements is like starting a journey to a new destination without GPS or a map.
Investment properties should always be approached with a good strategy, even before looking for the best purchase.
Let’s look at some of the key elements of real estate investing that you should know inside and out and the type of investment strategy you should implement for guaranteed success.
Purchasing a buy-to-let property: Tips
Why do you invest – Define your goal
Many people like the idea of investing in real estate to make money, but this is not a good enough reason to go out and actually do it.
You have to take into account your long-term goals:
- Do you want to secure additional passive retirement income?
- Do you want to leave an inheritance to your children?
- Do you wish to earn enough passive income from real estate to enjoy a certain lifestyle?
- Do you strongly believe in a certain sub niche of the real estate market, such as buying a holiday home in France with guaranteed return, already rented properties in Sweden [AVAILABLE SOON] or Germany, furnished rental to expats (by investing in real estate in Brussels), and so on?
- Do you have EUR 50 000 in savings [AVAILABLE SOON] of your total assets that you want to invest in a buy-to-let property? Or rather double that, such as EUR 100 000 of freely investable capital [AVAILABLE SOON] to inject into real estate?
- Are you looking for a real estate investment that is hands-on or hands-off? Active or passive investment is an important issue as the nature of the buy-to-let property has a major impact on your private life.
Once you have determined your long-term goals, it is time to think about how property investment can help you achieve them.
Set a timeline for your goals and make sure you evaluate your progress regularly to make sure you are on the right track.
The importance of capital appreciation – Purchasing a buy-to-let property: Tips
The basis of a good investment strategy such as defensive real estate investing?
The first is to build a portfolio of properties that can generate good long-term capital appreciation.
As your properties increase in value, you can then use them as leverage.
By using that growing wealth as collateral, you can more easily acquire and finance additional properties. It is a self-reinforcing snowball effect.
In other words, by investing in properties that can increase in value, you can build your property portfolio faster.
By using financial leverage, you can add more and more properties to your real estate portfolio over the years.
Can you add value?
If you can find an investment that will allow you to create immediate added value, don’t hesitate.
By buying and investing in properties that are in need of renovation, you can make an immediate profit on real estate and realise a capital gains bonus.
This means that you can once again expand your property portfolio more quickly because you can start using leverage on the basis of collateral that is worth more than before.
The key here is positivism with a healthy dose of realism.
You can do deals if you develop the talent to see potential that others will only overlook.
Empathy and mental visualisation can certainly help.
Suppose you see the potential of a flat from the 1970s.
While others see only a smelly, old and boring flat… Then you can do a golden deal through the following combined effect:
- Firstly, in such a case, you can get a competitive price . It is possible to buy such a property for a price below its intrinsic value. Something ugly and in need of refurbishment is not for every buyer…
- Secondly, if you renovate and refurbish the flat wisely, you can get a double return bonus :
- By giving the walls and ceilings a lick of paint, renewing the kitchen and bathroom (these days all this does not cost a fortune in DIY markets) and perhaps adding new carpets and curtains, you can increase the market value of the property. This will benefit property value appreciation later on.
- But more importantly, in the short and medium term, such an intervention can boost rental income.
Avoiding bottomless pits that require a lot of structural repairs is the key to success for such a strategy.
Indeed, it is only the cosmetic interventions, the refurbishment works, that add value to the property.
And not the structural renovation work such as installing invisible new water pipes or electricity wiring.
How will you go about financing?
Do you have sufficient positive cash flows and/or savings to invest in the right buy-to-let property?
Don’t rush into this and find out everything you can.
Do not make the mistake of buying property that you can afford if the property is located in an area that cannot generate sufficient long-term capital growth.
You might think that purchasing a buy-to-let property is only possible in a regional city, a suburb or a small town.
But the problem with such locations (B or C locations) is that they are less interesting to property investors than centre locations (A locations).
Such B and C locations often lack the desired amenities, such as shops, restaurants, service providers, etc., and do not offer the best employment opportunities either!
In addition, good city centre locations are simply more popular with the general renting public.
So you need to be sure that you have the necessary funds to realise your ambitions in practice.
A good mortgage broker who has experience with real estate investments can be your best partner in this area.
Such a mortgage specialist can look at your borrowing capacity and assist you in devising a suitable lending strategy.
The focus should be on building up your property portfolio in combination with the right loan for your situation.
Do not underestimate this phase of real estate financing.
A well thought-out approach to and structure of your real estate financing from the outset can save you a lot of money in the long run (and thus generate additional returns).
Optimal savings and tax savings
Besides using a good financing plan to meet your investment goals, you also need to understand how to structure your property portfolio to get the most out of it.
Advice from a good accountant and/or tax advisor who has experience with real estate portfolios is certainly in order here and really worth the money.
You can buy and hold real estate in different ways.
What is the best option for you should be found out with the help of specific legal and financial advice.
The chosen strategy must be suitable for achieving your goals, that is the most important thing.
It often happens that a beginning real estate investor starts out without thinking about the future.
This can later turn out to be very expensive in the form of thousands of euros in taxes that could have been avoided had the person started out with the right structure and approach.
Analysing your goals from the start (donation, capital growth, passive income to live on, active professional involvement in real estate, etc.) is crucial to implementing the right structure from the start.
If you do not do this, you will have to make adjustments later, which again will cost a lot of money in terms of lawyers, notaries, legal and tax advisors, accountants, etc.
And don’t lose sight of the fact that buying an investment property can ensure that you can finance your old age without any problems.
Read more on Saving for retirement: real estate vs. traditional retirement savings [AVAILABLE SOON].
To sum up: Purchasing a buy-to-let property: Tips for the right initial structure are crucial! This is in order to be able to optimise taxation.
Dare to ask for help – Purchasing a buy-to-let property: Tips
All successful investors know they cannot do it alone.
They consider it important to surround themselves with the right people, experienced qualified real estate professionals.
Consult an experienced mortgage lender, engage an accountant/tax consultant for tax optimisation and consider a steward for managing the buy-to-let properties.
Alternatively, you can directly opt for ready-made rental property with rental guarantee.
In any case, this will avoid headaches in terms of maintenance, rental, vacancy and so on.
One last tip
Investment properties should be part of a long-term strategy.
This makes it a more predictable investment and also eliminates the chance of emotions suddenly taking over leading to bad decisions.
The chances are pretty good that you will become wealthier and richer by the things you fit in and give thanks for than by the things you go for impulsively.
So plot your own course and do not deviate.
Trust your personal strategy, this will also help you say no to opportunities that are not fully in line with your plan, vision and strategy.
Other opportunities are always presenting themselves. Tip: Check out the investment opportunities at the bottom of this page…
If you miss one train, there is another moment to invest money in real estate the next.
Nine common mistakes made by real estate investors
Below you can find an overview of 9 mistakes that real estate investors often make. So try to avoid these pitfalls yourself – you are hereby forewarned!
Not being financially literate
You do not have to have a degree in economics, finance or accounting to invest in real estate.
But you have to have some knowledge of money and how money rules the world.
Investing in real estate usually requires borrowing money.
And without the basic knowledge of how real estate finance works, you could inadvertently limit the amount the bank is willing to lend you, starting off on the wrong foot.
You should also know how to budget and save money.
After all, your real estate investment will require a certain amount of financial maintenance over the years.
If you do not make proper preparations, you may find yourself swallowed up by debt.
Being too afraid to invest | Purchasing a buy-to-let property: Tips
It is fine to admit that investing in real estate can be an intimidating idea.
Stepping away from such a large amount of money and making such a big decision can seem daunting.
But if you are well prepared, it need not be so scary that it stops you from taking action.
Unlike the stock market, real estate is less volatile and can offer more stability than other investment choices.
It is also much more predictable so you can rest assured that once you have done your research, you are likely to get an excellent result in the long run.
You also have the choice of surrounding yourself with advisers who can help you make the best decisions and thus reduce the risk of mistakes.
Trying to diversify too much and too quickly
When you diversify your investments, it essentially means that you include different types of investments in your investment portfolio.
Think of stocks, bonds, mutual funds, real estate, art, commodities, gold, and so on.
This sounds like a good idea – in theory.
In practice, diversification can lead to mediocrity: average performance, average results and, as a result, average assets.
This is because real estate can be too capital intensive and too expensive to diversify effectively.
In fact, real estate is one of the only investments where it can actually be profitable to bet on one horse and take good care of it.
Just make sure it is the right horse on which you have pinned all your hopes and dreams.
Trying to outwit the market
We would all like to outsmart the market by trying to time the purchase of property in the perfect place.
Exactly during the depression phase of the investment cycle and ready for huge profits through capital gains in the future.
Indeed, real estate can be relatively predictable. But if you are planning to try and time the best moment for your entry into the property market, the wait may not be worth it.
Many property investors take the advice that “the best time to invest is yesterday”.
Yes, it is ideal, if you can, to buy at rock bottom prices during a depressed phase of the property market.
But if you invest in good quality property in a prime location that is very attractive to tenants, your long-term prospects should be positive, no matter how much you pay.
Trying to go against market trends is also best avoided.
They are trends because they work, so don’t make the mistake of thinking you know better.
Focus on areas where there are enough jobs and infrastructure or where tourists spend their holiday money.
Not having a system – Purchasing a buy-to-let property: Tips
Investing in real estate is not something you can do on a whim.
You need to have a decent plan to maximise your potential returns and there are many different ways you can do this.
One of the most popular strategies is known as buy-and-hold.
This involves buying a property with the aim of generating long-term capital growth by adding value through renovation or redevelopment.
Until the moment of sale, you rent out the property and try to maintain a positive cash flow each month after paying off the loan.
There are also property investors who focus on purchasing promising properties in an emerging region.
They immediately add value through renovation, refurbishment or redevelopment.
Then, over time, they refinance the loan, reducing the monthly repayments.
This can make the monthly cash flow positive or even more positive.
And so they can keep the property in portfolio for the long term as a generator of passive income.
Whatever strategy you choose, choose one that works best for you.
This can only be done by taking into account, on the one hand, the time and capital you have available and, on the other hand, your long-term property goals.
Also remember that getting rich in real estate is only possible in the long run.
Failure to evaluate the performance of your investment portfolio
Investing in real estate is not something you can “set and forget”.
It is something that takes time and dedication, and needs to be evaluated regularly.
At least once a year, you should take the time to evaluate your investments with an independent property strategist.
This need not be an expensive consultant.
It could just as well be a very experienced friend, acquaintance or family member with packs of experience in the particular property market.
A qualified and independent opinion from such an outsider is useful because over time you may become emotionally attached to your property portfolio.
Therefore, obtaining an objective viewpoint can help you to see your situation clearly and objectively again.
Focus on your own backyard – Purchasing a buy-to-let property: Tips
Investing in real estate with the blinkers on… With a local mentality, as it were, abstracting from other regions and destinations…
This is a common mistake that many people make.
It is a mere matter of feeling because they feel that they can achieve better results if they focus on their own comfort zone.
But even though you may have lived or worked in an area for years or even all your life, this does not mean that it makes financial sense to invest in a buy-to-let property there.
Strongly consider becoming a borderless investor and investing in rental properties in another province, part of the country, state or country.
Getting started in real estate? By approaching things with an open mind, you may well discover things that you would never have suspected or believed before.
Failure to take into account property cycles & market history
Real estate is cyclical by nature. The market undergoes periodic corrections, just like other investment products.
Strive to make the most of these cycles by understanding what they are, when they occur and how they can affect your property investments.
By gaining such insight, you can make the best and most profitable investments.
History does not necessarily repeat itself and past performance is never a certainty for the future.
But… That said. We can learn a lot from history and previous market cycles.
Analysing and understanding history can help us make better decisions and ultimately better investments.
Please note: This does not automatically mean that you should wait or time your purchase in line with cyclical conditions.
What it does mean is that you have to be aware of how the market is evolving…
This allows you to determine the best strategy on how to take action and when to schedule an exit (sale), for example.
On the hunt for the next hotspot – Purchasing a buy-to-let property: Tips
If you are looking for the next real estate hotspot, you are not investing but speculating.
This is like gambling and is a very daring way to try to build up your wealth.
Trends in real estate fluctuate just like trends in other markets, and this year’s hotspot will most likely not be in demand next year.
Compare it to fashion, for example. You buy clothes that are hot at the moment…
Well, chances are pretty good that you won’t have to wear it next year because it’s completely out of fashion. So has that been a good investment?
If you can only make limited use of it and then put it away and don’t use it again?
Well, a similar phenomenon is also taking place in real estate markets. So do not make the mistake of thinking that you can make quick money when you invest in real estate.
Choose stable, proven types of buy-to-let properties and regions.
And are you going for investment property with rental guarantee? Then only deal with a reputable turnkey investment property developer and operator that offers an all-inclusive service package and worry-free rental service.
Avoid possible one-day wonders, even if it seems so attractive. Opt for businesses with a proven track record.
The risk with something new is often greater than originally thought. Investing money in real estate is a long-term game.
And if you want the best results, you should be committed to the idea of investing in real estate with an investment horizon of at least 10 years.
Hopefully this page about purchasing a buy-to-let property has been of use to you: Tips and Tricks + mistakes to avoid.
Range of passive buy-to-let properties for sale
Evaluating an investment property and purchasing a buy-to-let property can also be done with attention to diversification in terms of security and guarantees.
Investing in real estate with a rental guarantee, for example, offers the advantages of a classic savings account as well as physical investment property.
Such rental guarantees linked to passive buy-to-let properties vary enormously and can be roughly divided into three types:
- Buy a second home in France with a guaranteed return of up to 8% per year and 2 weeks free private use per year. Bonus return: resale at minimum 125% or 150% of the original purchase value after 5 or 10 years respectively.
- Recreational real estate in France as a carefree investment with guaranteed return - you can invest as little as 17 230 Euros, with up to 8% annual return. No free private use but at favourable rate. Bonus return: resale at minimum 125% or 150% of original purchase price after 5 or 10 years respectively.
- Buy a second home on the island of Samos, with free weeks of personal use and contractually guaranteed returns
- Buy a flat on the Costa del Sol [AVAILABLE SOON] including a carefree rental service and returns
- German real estate as investment with security of tenure and low entry costs, including trustee and steward
- Buy-to-let property in Brussels in Woluwe, a real top location that allows for a value-adding real estate investment. Passive investment with 5-6% return if you partly finance with a loan
- Buy a new flat in Brussels [AVAILABLE SOON] in Evere as a passive investment with rental service from A to Z, as from 85 000 Euros own contribution with an annual return of +/- 5,5% (passive investment in Brussels real estate is possible here)
- Invest in Swedish family homes for rent [AVAILABLE SOON] on a beautiful plot of land and with attractive potential gross annual returns
- Buy luxury property in Montenegro with magnificent views and free 6 weeks of private use per year, including rental service by the resort with promising annual returns. 100% personal use is also possible.