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Hannah McQueen of enableMe Says the Secret to Property Investing Success is Not Having to Sell at the Wrong Time

Friday 19 October 2018, 3:31PM

By Beckie Wright

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Hannah McQueen says, "If you're highly negatively geared you're the most at risk to changes in interest rates, income or big maintenance bills. If you lose your job the risk is in how long it takes to find new work, or if your new income is lower. The buffer simply buys you a degree of comfort during uncertain times. At a minimum it should equal two to three years of topping up that mortgage. If your top up is $150 a week your buffer would be $15,800 to $24,000.

This can be cash, a revolving credit, or if times get desperate – an advance on your credit card. You can buy in the very best location, but you could still get burnt if you're forced to sell at the wrong time, which is why being prepared to hold on for the ride is so important. A mortgage interest rate increase can be manageable if you're working but quickly become a crisis if you lose your job.

McQueen believes property will remain Kiwis' investment mode of choice – for better or worse, and capital growth is not the only reason people invest in property. While it's not common in the big centres, it's still possible to get a positive rental return. Property is all about timing. Whenever you buy in, you need to be able to hold on when the going gets tough, so you don't have to sell at an inopportune time.

As McQueen says, “If you haven't been in the market long - or your memory is short - you might wonder what a bad time to sell looks like. Interest rates have been low for the better part of a decade, and house prices have been rising almost as long. Demand still outstrips supply, and the OCR isn't expected to rise until 2020.

“However, assuming prices will always rise or that borrowing will always be cheap is foolish – just ask someone who experienced floating rates north of 10 per cent around 2007, or 20 per cent in the 1980s. Or consider that prices fell 40 per cent in the late 1970s, and during the GFC they fell 8 per cent. What happens to house prices during those times isn't the biggest issue – it's whether you have to sell and realise the loss. Being able to hold on in the tough times, so you can sell when the time is right, is crucial.”

For more information on financial advisors, budget advisors and personal financial planning please go to http://enableme.co.nz .