If you're considering investing in property you'll no
doubt have a ton of questions.
So in this video we're going to take you through
the top seven questions that you should ask yourself
before you invest in property.
The first question you should always
ask yourself is:
What's the right strategy for me?
There are two main strategies that you can
use as a property investor.
You can buy and hold or you can trade property.
Buy and hold investment is a long term strategy
where you use property to achieve your long term goals.
Goals like building a passive income,
preparing for retirement,
or just growing your wealth to get rid of your
money worries.
It's a strategy that happens over time
alongside your working life rather than replacing
your job right now.
This means that you can carry on with normal life
rather than making massive lifestyle changes.
Traders on the other hand,
often want to work on their properties to become
their full time job. This is more short term focus,
active strategy that you use to replace your income now
by working on and selling properties.
Of course the right strategy for you is going
to depend on what you want out of your portfolio.
The next question you should ask yourself is what are the right
properties for me?
Properties tend to fall until a couple
of categories and the right property for you is going
to depend on your personal situation
and the strategy you decide on.
Let's start talking about growth in your properties.
Investors who are still building their wealth,
and have ten years plus left in the market will tend
to invest in growth properties.
These properties tend to go up in value faster,
which help you build your wealth quickly,
but often have a lower yield.
Growth properties tend to be like standalone houses
and townhouses located in major cities.
On the other hand investors who are nearing retirement,
or who already have significant wealth,
tend to focus on higher yielding properties
like apartments and room by room rentals.
These properties work great for people who are moving
from the stage in life where they are accumulating wealth
to where they are living off the wealth they already have.
So the right property for you depends
on the stage you are at in your wealth creation journey.
Similarly you can also categorise properties based
on whether or not they are brand new or they’re existing
and require renovations.
Newer properties work for investors who want
to be hands off, who want a low maintenance,
low surprise investment or who favour long
term predictability.
Whereas if you prefer to get your hands dirty
over the weekend, and want to renovate a property,
then existing properties are going to be
the right way for you to go.
Question number three.
How big should my portfolio be?
Your portfolio needs to get to the size where it can support
the lifestyle you want to lead.
For instance if you want a passive income of one
hundred thousand dollars a year today then based
on a 4 percent net yield,
you'll need two and a half million dollars worth of debt
free investment property to generate the level of income.
That then increases with inflation.
The question then becomes how many properties
of each type i.e. growth or yield will you need,
so you can hit that equity goal within your desired timeframe.
The next question is a favorite of papers and investors alike.
Where’s the best place to buy at the moment?
As you can imagine the best place to buy is constantly
changing based on if an area is going up
or down at any one time.
And what is considered to be a good place to invest changes
based on your strategy and how you view property investment.
But generally speaking the three areas we tend
to recommend right now are Auckland, Hamilton,
and Christchurch.
And that's because these areas tend to be at opportune
points in the property cycle.
They all have significant infrastructure in the works,
have growing populations and strong economies.
This makes them stable and predictable places
to buy and find rental properties for buy
and hold investors. On the other hand,
location is less of a concern for traders because you’ll
buy and sell in the same market.
Of course it does help if the property prices are going
up at the same time as well.
Let's now go through a few financial questions that might
be running through your mind.
This is probably the most common question that we hear at Opes.
Can I invest in property?
While you probably won't actually get a final yes or no
answer until you put an application for a mortgage
at your bank,
there are some general rules of thumb.
You need about one hundred thousand dollars worth
of either cash or usable equity within your home
to use it as a deposit,
and you'll need enough income to be able
to afford the extra mortgage under the bank's
test conditions. Of course,
the rent from your tenant will cover the interest
payments on your mortgage,
but the banks will test whether you can afford
the mortgage under a few stricter test conditions.
The simplest way to see a few pass these two rules of thumb,
is by taking our property investor quiz,
which you can find on the Opes Partners web site.
Question number six.
How much do investment properties cost?
It won't surprise you to learn that the cost
of an investment property changes
depending on where it is, what it is,
and what it's made of.
But it's important to have a rough idea in mind,
because the price that you pay for a property impacts
the amount of deposit you need in either cash or usable equity.
Usually, the price of a property for a first
time investor might be around five hundred to eight
hundred thousand dollars.
The five hundred thousand dollar type
properties are more likely to be in a city like Christchurch,
whereas Hamilton property is more likely
around the 600000 mark. Equally,
an entry level investment in Auckland or Wellington
is more likely to be between seven hundred and eight
hundred thousand dollars.
These are just ballpark figures,
but they act as a starting point when you consider
beginning or adding a property to your investment portfolio.
Question number seven is about working with the people to help
build your property portfolio.
Should I use a property partner and how does it work?
A property partner is someone who can help
you create and then write down your
property investment strategy.
They'll also help you find the right
properties that fit the strategy,
and then make sure the numbers stack up
for the property as an investment.
Different property partners specialise
in different strategies,
so it's important that the property partner
you choose specialises in the strategy
you want to follow.
The program we walk investors through here at Opes Partners,
is focused on helping investors follow a long
term and buy and hold strategy,
generally focused on a new or newly renovated property.
This can be either as a sole strategy the investor follows,
or as a complement to another strategy the investor
is working on.
This works great for investors who want to follow the buy
and hold strategy but wouldn't be the right fit for investors
who only want to follow a renovation or trade
based strategy. And as a bonus,
we've got one final question which we hear all the time.
How do you get paid if you don't charge a fee?
Here at Opes we currently don't charge a fee when people
go through our program.
Instead we get paid a fee from the property owner
if we recommend it to you as an investor
and you act on that recommendation.
It's very similar to a stockbroker who gets paid
when they analyse the market, recommend a stock,
and then you agree with that analysis and take
them up on their recommendation.
It's important to note that the fee we get paid
is exactly the same no matter what property
we recommend.
This is important because it means that we're
not incentivised to recommend you a more
expensive property that doesn't make sense
to you and your portfolio.
Making this video has made me think about the first time
I bought an investment property, along with the excitement,
the nerves,
the eventual rush I felt when I signed and secured
the first property of my portfolio.
We love working with property investors to walk
them through that exact process,
from forming a property investment plan,
to selecting the right properties and working
through everything that needs to be considered.
And I think that experience working with a professional
to create a plan is the really important next step for you.
We look forward to meeting with you and working
with you on your property investment journey.