I started my career in the health industry in a rural town. I was paid well and had living expenses paid for by the company. Ecstatic about my financial position, I wanted to jump straight into the property market as soon as possible.
Mistake number 1: Rushing into property without educating myself enough about the market and learning better negotiation skills.
I found a property that was in my budget and had a fantastic yield of 5.5%. All the other properties that I searched for in this particular suburb had a yield of around 4%.
Gross yield is the return on the investment before expenses and taxes are deducted. It is calculated by:
Annual rent/Property value x 100 = %
Because the property had many bedrooms and the yield was quite high for the area, many family and friends suggested that it would be too difficult to rent. Luckily this was not the case. I have been able to rent out the property consistently.
Looking back now, the only regret I really have is my naive and poor negotiation skills. I was too excited about the yield and paid $10,000 more than what I could have bought it for. I made an offer too quickly before anyone else had made an offer.
Lesson learnt: Before making an offer, assess the market value and make an offer below this market value. Never make the first offer on paper or in an email, even if the agent requests this as this leaves gives you flexibility to change the offer if required. For example, after pest and building inspection you may need to ask for a discount for any faults to the building.