Property Investment | Top 10 Property Investment Mistakes

Property Investment

There are many different reasons why New Zealanders invest in property. Perhaps the most stand-out feature of real estate investment in terms of creating wealth is the ability for long term capital growth.

What the capital growth would look like on a $200,000 property after 10 years:

5% Capital Growth $326,000

10% Capital Growth $519,000

15% Capital Growth $810,000

During this period of wealth creation your property investment portfolio can also be continually earning you income in the form of rental yields too, it is easy to see that real estate can be a great way to implement a wealth creation plan and give you excellent, long term outcomes.

So if you are ready to start your property investing journey, here are four tips you can consider.

1. Check your finances

Investing in property is going to take some capital investment, so you need to take stock of all your assets, your income and outgoings and work out how much you have available to invest.
Speak to your accountant so you can get an accurate picture of your current financial situation. If you don’t have an accountant, choose one who already owns investment property and understands the journey you want to take.

You can also talk to a bank or mortgage broker and get pre-approval on how much you are able to borrow given your current situation and circumstances. This will help you set a realistic budget and get some buying rules in place.

You can also discuss whether you have any equity available in your home that you may be able to use to kick start your property investment portfolio.

2. Understand your attitude to risk

As with all forms of investment, property investment carries inherent risk. Your acceptance of risk will usually depend on your current financial situation and time of life.

To determine your level of comfort with investment risks consider your level of income, the needs of your dependents and current debt repayments that need to be met. Can you afford to keep an investment property that may take three months to tenant? Is your income enough to secure you a mortgage loan?

If you are concerned about the level of risk in real estate investment – start simple, don’t over borrow or over commit and don’t panic if capital growth stalls for a couple of years.
Start safe and manage your level of risk with as much accurate research as you are able to do, combined with solid financial backing.

3. Choose your property investment strategy

Having goals in place is a great start, now what is your strategy for achieving them?

There are many different property investing strategies you can follow, which include:

  • Purchasing at a discount
  • Positive cash flow
  • Having access to a monthly income stream
  • Sub-division
  • Off-the-plan
  • Renovation

Click here to read more on investment strategy.

4. Build a team around you

As a general rule for getting started in property investment, you should choose a property investing team of experts whose help you can call upon.
This team will include: accountant, lawyer/conveyancer, bank/mortgage broker, independent valuer, contractors (trades) and property manager.

Property investment is a complex subject, but we hope this article will help you get to grips with some of the fundamentals and can go some way to help you decide whether it is a wealth creation strategy that is right for you.

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