FINDING a good value property investment is not always easy, but there are common mistakes that first-time investors regularly make.

Here are the top three mistakes and how to avoid them.

1. One-bedroom/studio apartments

Property investors have to be wary of the notion the cheaper the better. While one-bedroom and studio apartments cost less money to buy they can be typically more expensive per person to rent and that can limit the market of people who want to rent or buy them.

It’s much cheaper for two people to rent a more expensive two-bedder as they can split the weekly rent two ways. Three-bedders are cheaper rent again, however there are fewer people who want to share between three. While your decision will ultimately depend on the suburb and its demographic, a two-bedroom apartment is usually a good choice.

Prestige apartments

By definition prestige apartments are only affordable to the top 10-20 per cent of the population rather than the 80 per cent majority. As prices get higher, demand gets lower, and the rental return starts dropping to as low as 1 to 2 per cent, which makes it harder to achieve cash flow if you have a large mortgage. Capital growth can be good as buyers don’t have the same affordability concerns as the lower end but it can be more volatile, especially in very tough times. Some investors choose to furnish their top end investment apartment and rent it as an executive rental. This can increase cash flow but can be very volatile and is dependent on the economy.

Off-the-plan investments

There are pros and cons to every investment option and off the plan is no exception. If the market is growing rapidly, you buy at today’s price but then settle in a few years time when the price has ideally grown at 10-20 per cent. If it all works out, and the 80 per cent the bank lends you on settlement is more than the purchase price, you could end up with an apartment with no deposit down. On the other hand, if the market moves against you, you could be putting down a 20 per cent deposit on the current cost plus the amount the unit has dropped.

Deposit bonds and bank guarantees make it easy to buy for little initial cost but many people have over paid for units and ended up losing a fortune when they can’t settle. The best advice is to hire your own independent valuer to assess the price being charged and then get some independent research to suggest where the market is heading. You should also have plenty of equity to protect yourself in case the market does change.

* Chris Gray is the host of Your Money Your Call on Sky News Business Channel