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Between plans to ring-fence losses on rental properties and the possibility of a capital gains tax looming, there's no doubt the investment landscape is changing, but enableMe’s Hannah McQueen says, “I still believe property will remain Kiwis' investment mode of choice – for better or worse”.
Buying an investment property is a big decision, and the long-term trend for property prices has been up, with prices increasing roughly 80% every ten years. Within that period there have been times when prices have slowed, stalled, or dipped. When house prices fall, it’s usually connected with a change in the economy’s fortunes, and so the prices of most assets, like shares and property, are similarly affected.
What you need to remember is this is only an issue if you are forced to sell at that point. Having a plan and a buffer can help ensure you get to sell when the time is right for you. Inevitably, interest rates will eventually rise from their current historic lows. Again, this comes down to having a plan and a buffer to ensure you can tolerate interest rates rises.
The cash flow implication of owning an investment property is there’s often a weekly cash top up required. If your income dropped, you’d still need to be able to maintain that payment. McQueen recommends having an overdraft facility equal to at least 12 months of top up, which would give you 12 months to reinstate income or adjust your spending to continue to afford the top up.
Property is a great way to make money over the long term but like any investment, there are risks – it’s just they’re often not discussed. If you're interested in property but don't know where to start, check out McQueen's 'Buy Property Like a Pro' workshop - it's a supercharged workshop that will leave you confident and invest-ready.
For many it's also about investing in something that doesn't disappear into thin air in a downturn and doesn't involve shareholders, annual general meetings or really any other party, other than the bank, so for more information on financial consultants, financial advisors, mortgage advisors and retirement planning please go to http://enableme.co.nz .