- Hello, it's Connie here from Perspective Finance,
sharing the best financial tips
so that you can be more successful
with achieving your financial goals.
Now, recently we observed
that some property investors have backed off,
instead, more people now interest in buying first home,
more people interesting upgrading home,
and some people also planning
to develop property on existing sites.
Now, in today's video,
I'm going to share with you
my thoughts around property investing
so that it may help you to clear your mind
and see what is the next step for you.
So, firstly, I want to point out
it's not affordable, not to invest.
Now, why is that?
Now, when people retire at the moment,
they rely on superannuation.
When I look up the website today,
I notice that if you're living alone,
you would get $504 per week.
If you are a couple,
you will get $770 a week.
As you know,
it's very expensive to live in New Zealand these days.
So the amount of super you can get
can cover your living costs,
but if you want to live in a decent lifestyle,
they're probably not sufficient.
Now, so you need to build passive income.
And in my case, I probably retire in 30 years.
I don't even know if superannuation still exists by then.
So how much passive income you need?
Well, I think it really depends
the lifestyle you want to live later on,
and also your family structure.
For example, if you have dependents or not,
you are on your own,
or you're living as a couple.
But let's say, you want have 100K before tax passive income
per year per person.
Now, on top of your mortgage-free home,
you would need a net investment assets value of $1.67 mill.
How it's calculated?
It's simply 100K divided by 6%, is $1.67 mill,
so that means after paying off all your loans,
including your home, your investment properties.
So it's very significant
if you really want to live in a lifestyle
that you deserve.
So you really need to start planning now and take action.
Now, investment can be in many form.
You can buy shares,
you can buy property, business,
you can buy managed funds,
you can buy bonds and,
or just simply put your cash in the bank
and get deposit rates.
Now I do appreciate the diversification of investing,
but I really think property should be
one of the main asset class you invest.
Now recently, New Zealand government
have introduced the interest deductibility rule,
and to a lot of people, it's really daunting,
because in the future,
you can no longer offset the interest costs
against your rates.
So a lot of people now not to invest in property,
but I think it is really important to realize
if you don't invest in property,
then you can't really have a good lifestyle.
Well, why invest in poverty is worthwhile in New Zealand?
And in fact, lot of kiwis love investing in property.
I'm one of them.
Now, the first property I bought was in 2009.
So I've been buying property over 10 years.
But you know, I haven't sold any single one.
It's really, for long term,
it's for my retirement.
Now, I want to share with you
several reasons you should invest in property.
Now the first reason is property in New Zealand
and some other countries, also,
is it's probably the most stable asset class.
That means it doesn't really volatile much.
Now that's because people always need a place to live,
so especially if you buy right in the right location,
and it's guaranteed that the demand is always there
because people need a roof over the head.
So it is important that you buy in a good location
in a big city or satellite city
where population growth exists,
and there's job opportunity,
there's a lot of different industries there.
So if you get that right,
it's very hard to lose your money.
Now, the second reason is with New Zealand property,
the capital growth is predictable.
Now, based on evidence,
in New Zealand, the property value increase 100 times
between 10 to 12 years.
So if you buy a property for a mill today,
you would expect in 12 years it's worth two mill.
So that's massive property value increase.
That means wealth, right?
Now, the third reason is it's very easy to start.
You don't really need to have a lot of knowledge.
Now when I bought my first property,
apart from the location,
I have zero knowledge.
But when I look back,
all my property has gained significant value
over the last 12 years.
Obviously, if you want to build your equity fast,
grow your capital value fast,
you do need deep knowledge and experience.
But just to get started,
you really don't need much knowledge at all.
I also delegate my property to property manager,
so they manage for me.
I don't need to keep up with all the changes
and I don't need to deal with tenants.
So it's really largely set and forget for me.
I don't need to work on it, right?
So it's passive income for me.
Now, the next point is really the power of leverage,
it to do with the finance.
What that mean is
in today's world,
if you have $4,
bank will give you $6 to invest,
you can buy $10 assets,
but you keep all the gains
when the property growing value.
With other investments like stock,
you can't really borrow to buy stocks,
you need to use your own money.
Let's take an example.
Now, currently, as I mentioned,
in New Zealand,
the loan-to-value ratio, which is LVR, is set for 60%.
So if you invest in 200K in cash,
the bank will lend you 300K.
You can buy half million dollar property.
Let's say in a year time, the property growing at 10%,
so how much profit you gain?
50K, that's 10% of 500K.
But you keep that 50K,
the bank don't take any dividend from that.
You know, in contrast,
let's say you also have 200K,
you use all the money to buy stocks.
Now, also grow in 10%,
the profit you make is 20K.
50K versus 20K,
25% return versus 10% return.
You get that.
Okay, so the next point is about in your control,
you can add value to the property,
such as renovation,
such as add a minor dwelling like granny flat,
or you can subdivide it
if you have the potential and capacity to do.
So there's a lot of things you can do.
What can you do about the stocks?
You can't really influence the value, right?
Next point, you can insure your property,
but you can't insure stocks.
Now in New Zealand,
in fact, property insurance is mandatory.
That's the only insurance you have to buy
if you want to get a mortgage.
You don't have to buy personal insurance,
medical insurance, et cetera.
But if your property have been damaged and need to rebuilt,
you will be paid for the rebuilt,
but you can't get insurance for other investments.
And finally, it's to do with the COVID.
How lucky we are in New Zealand,
we don't have community transmission.
But look at some other countries,
they are devastating.
So since COVID start,
lot of people are thinking moving into New Zealand
for living.
They feel very safe compared to other countries.
So it's kind of predictable
that New Zealand population growth
is going to be much higher than previously predicted.
So these are the several reasons
I really think you should invest.
The recent tax changes, it's only affecting the cashflow.
It is important that you be careful
and review your cashflow position
and make sure you don't broke,
because investing property is long-term game,
it's like a marathon.
But as long as you can afford to keep your property,
I think you need to focus on the long run,
the long-term benefits,
which is the capital growth,
which is the wealth,
which help you to pay off your debt
and help you to have the passive income
for your retirement.
You may want to say,
but it's not a good time to invest.
Well, yes, compared to 10 years ago.
You should have invested in 10 years ago.
But, hey, the second best time to invest is now.
It is now.
Even there's a bit fluctuation in value from time to time,
but as long as you keep them, you don't sell them,
you don't lose any money,
it's a long-term game.
So you really should invest now.
Now, as I mentioned, about two weeks ago in my video,
I said banks are reviewing the bank policies
and reviewing their calculation rules.
So, potentially your borrowing capacity
will reduce dramatically in the near future.
So if you are thinking about buying property,
please act now.
All right.
So I hope you find it's useful
and help you clear your mind.
Now, if you like our video,
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I will see you next time.
Bye-bye.
(upbeat music)