It looks like you’re interested in property investment and how to manage the risks involved? Property is definitely a stable and high performing wealth creation vehicle in the long term, but it does come with risks.
One of the most important things to remember is that property moves in cycles. In 2023, we’re seeing a dip in property prices due to various factors such as government policies, Australian banks seeing New Zealand as their cash cow, and the failure of overseas banks. However, history has shown us that this is just temporary.
To manage risk, it’s important to have a plan and set short, medium, and long term goals. For example, in the short term, you could look at your home mortgage and see if you’re paying more than you need to. By paying the minimum and extending the loan term, you could save thousands a month that could be used to top up the outgoings on an investment property.
In the medium term, you could consider using the equity in your home to guarantee a deposit on a new build investment property. Property in New Zealand tends to double every 10 years, so in 10 years’ time, the investment could potentially have doubled in value. You could then sell it, pay back the bank, and be left with tax-free profit that could help pay off your mortgage faster.
In the long term, it’s important to diversify your investments and build up an extra income. Property investment can be a great way to do this, but it’s important to have an exit strategy and understand the risks involved.
To put this into practice, we can look at some case studies. For example, Jane and Grant purchased two off the plan investment properties that have increased in value, and they’ve agreed to sell them to avoid tax liability and use the profits to put a deposit on two new properties, pay off their mortgage, and renovate their beach house. David, on the other hand, wants to supplement his pension and has agreed to sell his three investment properties, purchase one property outright for a return of $30,000+ per year, go on holiday overseas, and put the rest into managed funds to diversify his investments.
Remember, property investment can be a great way to build wealth, but it’s important to understand the risks involved and have a plan to manage them.