So you’ve won the family game of Monopoly for decades – are you ready to take on the real-life challenge of property investment? As investors ourselves, we’ve compiled some questions to help you consider your next move.
Do you want to be a passive or active investor?
Active investing requires a more hands on approach and can consume a lot of your time and energy. It’s also more popular in a rising market, where people think they can make a quick buck. Active investing can lead you to be buying and on-selling contracts, renovations, project managing, developing with some investors turning it into a fulltime job.
As the name suggests, passive investing is the opposite, where you may still use some of the above strategies but choose to use professionals to keep as hands-off as possible. Hiring property managers, brokers, and project managers to take care of the work enables you to do what you do best and leave the rest to professionals. The goal is to hold on to your investment long-term, creating a passive income and benefit from enduring capital gains.
What’s your risk appetite?
Although you may have a high-risk appetite in a game of Monopoly, as with all real-life investments, you need to explore the risk extensively before committing.
How much can you afford to start?
Why are you doing this?
What happens if things don’t work out?
How liquid do you need your investment?
It’s important to compare this with other investments such as shares, bonds, managed funds, commodities such as precious metals, term deposits or more recently, crypto currencies and NFTs, even holding cash could be an option that suits you vs. property investing or alongside to diversify.
What do you want?
We’re not here to gatekeep – property investing can and does have lots of benefits if done well. Firstly, you need to decide what you are trying to achieve through property investment – Are you after capital growth, cash flow or a quick return? Whichever you decide the numbers need to stack up – from the purchase price, the ongoing holding costs to the returns you’re able to achieve – check, check, then check those numbers again.
What type of property investment is right for you?
Residential rentals, boarding houses, short stay Airbnb type properties, student accommodation or commercial offices, retail, industrial warehousing, or even farmland – there’s a lot of options to consider, each with their benefits and disadvantages. It’s not uncommon to be involved in a few of these options for diversity and portfolio protection.
Have you got the right teammates?
If you do decide that real estate investment is for you, start by upskilling yourself and gaining some knowledge in the area and type of properties you are looking for.
Build relationships with agents in the area
Use a recommended accountant who knows property investment
Hire a local, experienced property manager and ensure you have a good lawyer, mortgage and insurance broker on your team who understands what you are trying to achieve and can help you get there.
Are you ready?
A lot of Kiwi’s decide property investment is right for them, after all property investing is one of the most popular vehicles to generate wealth in New Zealand. If you do decide to invest in the property market, you need to ensure you’re in a financially stable position and whether you can purchase a property outright or assess if you meet a bank’s lending requirements.
With so much uncertainty and a fluctuating market you need to ask yourself if the current market is right for your type of investment? …. There’s a popular saying that if you’re in it for the long run the best time to buy is yesterday and the second best is today.
The team at Terrace are local Bay of Plenty based property management experts – reach out to us on 022 674 5508 for advice tailored to your situation.
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