Investment Downside

Investing in property for the wrong reasons.
A couple of years ago property investment became trendy.    With low doc loans and easy finance people competed with one another to have the largest property investment portfolio.  Unlike most trends, property isn’t as easy to get rid of once the trend finishes.  Investing in property needs careful consideration and your desired outcomes should be clear before you begin.

Property investment is a full proof investment.
‘In this world nothing is certain but death and taxes.’ Benjamin Franklin.
Of course property investments can fail.  Any investment can fail.

Paying too much for an investment property.
Easily done during a boom period because values change almost daily (sellers market).  During a down turn or recession, values tend to be more conservative (buyers market).  Getting a realistic valuation by a ANZI qualified Valuer is key.

Choosing the right type of investment property.
‘In a nutshell, I believe that median-priced residential property is the best vehicle for building wealth for the average investor.’ Jan Somers, Property investment author.
This is a very personal choice and the debate rages on which is the best type of property to invest in.  Everyone has an opinion from location, location, location to only buy large tracts of land.  A good rule of thumb is what investment property will be attractive to the largest amount of tenants.  An empty property is an expensive one.

Expert media opinions.
‘If all the economists were laid end to end, they’d never reach a conclusion.’ George Bernard Shaw.
General market patterns are not difficult to spot, we all can see when prices are increasing, because we pay more.  When prices drop and money is tight, we know we are in hard times.  Media experts like to disturb and go against the grain because it gets them noticed.  Use common sense and avoid fear based decision making.

Using only one lender.
‘A Bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.’ Robert Frost American poet 1874-1963
By having all your property investments with one lender, the lender now dictates the terms.  Use a variety of lenders so that in hard times you at least have options.

Guaranteed rental returns.
Is the rent being guaranteed above or below market rates?  If it is below then someone is subsidising it.  If it is above market rates, then if possible perhaps you should rent it out yourself.  Housing NZ guaranteed rents are interesting.  Their terms are clear, but people still forget that rental reviews are done annually.  Rents can and have been reduced inline with what the market is doing at that time.  If you sell the property within the lease period, your HNZ tenant stays in the property.  Also landlord protection insurance may not be available for these properties.  Check with your insurer.

"The astute investor buys when everyone else is selling."

Leveragethis.com - Terry Saltnes - terry@leveragethis.com - +64 27 2956 929
Christchurch - New Zealand