Podcast: The Real Reasons Why Kiwis Invest in Property | Ep. 217

Posted by Ed McKnight on 23/04/20
The Real Reasons Why Kiwis Invest in Property 001
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Show Notes

What's Covered in the Show?

In this episode, we dig into some of the results from a survey we are currently running that digs into the real reasons why people invest in property.

The top 4 reasons Kiwis invest are: retirement, passive income, returns / grow wealth and to get rid of money worries.

Got 2 mins? Please take this property investors survey, so that we can get a sense of the type of content you will find most valuable.


Transcript of the Podcast

Ed McKnight: Hello and welcome along to the property Academy podcast. I'm your host, Ed McKnight, and I'm Andrew Nicol, and today on the show, we're going to do something that I didn't actually think we were going to do, which is we're going to talk about why people actually invest in property.

And the reason I say I didn't think we were actually going to do this is because we've been running a survey of property investors figuring out or asking them why they invest in property. And I initially thought we would keep these results quiet because I thought, Oh, you know, we don't want anybody to know about them. But I got all excited over the Easter weekend as I crunched the, as I...

Andrew Nicol: You wanted to keep our competitive advantage.

Ed McKnight: Well, yeah that's right. I didn't want anybody to know, because I know that lots of different people listen to this show, but I got too excited about it. So what we actually did is we put out a survey asking about seven to eight questions and they were all open ended. So we didn't tell people, you know, we didn't say choose from this list of four that, because we wanted to really get a sense of if we didn't give people options, what would they say? You know, what's actually in people's heads?

And they were things like, you know, for investors what's the one main thing that's stopping you from supercharging your portfolio and growing it further, and when you first got into property investment, what were you really interested in, or for people who weren't investing in property yet we asked them the same question phrased slightly differently. You know, why is it that you're getting interested in becoming a property investor?

And look, I've been going through all of these responses. I've been putting them into buckets. And what's interesting is the same kind of themes come up over and over again. And so I want to record this episode so that you can kind of figure out, well, what bucket do I kind of fit into? And so I want to start with this idea of, well, why do you want to invest in the first place? And as I was going through all of the different responses four things kept coming up all of the time.

Everybody's response fell into one of these four buckets, plus a little bonus one that I'm going to talk to you about. So the first was what we always talk about, which is retirement. The main response was people wanted to live a decent retirement, and that came through quite strongly. Not necessarily a very, extravagant retirement. They don't necessarily want to become the Wolf of Wall street, but they want to live a decent retirement that's free from worry. So that was the number one thing that came out. Then was passive income. So they wanted to build up a property, so that they could stop working, and still earn income, perhaps retire early.

So they're kind of related, but it's a different idea. So first retirement, passive income, number three was looking for wealth, to grow their wealth in general and builds their returns. And number four, and this was my favourite, was this idea of financial freedom or what we call "trademark" no money worries. I said trademark then I messed it up, but no money worries. And so these were the kind of four things that investors, you know, when we asked them, well, what are you interested in? Didn't tell them what to say, they came back almost uniformly with these four things.

Retirement, passive income, wealth/returns, and no money worries to get away from money worries. But what's very interesting, and I haven't even told Andrew this yet, was number five, which actually came across all responses was to help out others or to help out their family. So it might've been to set up their kids financially to raise financially independent children, to be able to help others.

A lot of people talked about humanitarian efforts that they would like to do once they are able to retire. So they are actually retirement, passive income, wealth returns, no money worries, but across all of them was about wanting to help out others, wanting to help out their families. And to me that's really important because we sometimes hear in the media that, you know, investors and landlords, we're all evil people trying to jack up rents and things like that. And sometimes we are, no, I shouldn't say that.

Actually the main reason that a lot of people get into property investment or all the people we surveyed or vast majority of them was so they were able to help out others. And I feel like there is a very interesting takeout, when we asked people this open-ended, now Andrew, why don't we talk about what people mainly said was holding them back from investing. What was the most common one we heard.

Andrew Nicol: So the most common thing that's holding people back right now is finance. So I wonder also, how far people have gone through with the finance side of things with figuring out whether or not they can actually borrow the money, but we'll assume that they've gone to a broker and found out that they're limited by how much the bank will lend them and probably one or two of the major things that are affecting people right now are LVR restrictions and maybe the interest rates, the test rate the banks uses when assessing your ability to service the loan, there might be some changes there. Number two is risk.

So just the concerns that go around with investing in property. So vacancy, maintenance all the things that we worry about having a bad tenant, and not knowing, probably how to mitigate. those risks. Number three is knowledge. So hopefully the people that listen to this podcast are going to get a good sense of knowledge of being able to invest in property. So, not knowing where to start. Number four is deals. So actually knowing what makes a good investment and we'll produce some more content around that, about what makes it good investment, and so you can identify when something is or isn't a deal. And number five is timing.

Now that's probably an interesting one that I get quite a lot when I'm working with clients. So it's not the right time for us. And, inevitably, I think, I was talking to someone the other day and he rang me up to sell me some advertising and ended up potentially coming to see us as a client. And his argument for not investing was timing because of kids, and I said, well, in my experience of dealing with lots of people probably buying a house as an investment property of burning house is probably like having kids.

Often there isn't a perfect time there's always a market factor or there's always something and our life's that's going to take away from the ability to invest in property and so you kind of just have to get in and do it or else you end up with kids and no investment property.

Ed McKnight: Very, very true, or you've got the one . But the interesting thing around finance as well is that people experienced investors mainly knew what the issue was. When they were typing this out they either knew well, it's serviceability or it's equity, or the bank won't lend me money. And so that's another area that we're going to be writing some more content about and producing about to figure out, well, what are the ways you can get around that?

And increasing your borrowing ability. Now, the last thing before we wrap up, and I ask you very kindly to please take the survey, so that we can have even more responses to dig through, is what else are you doing? So I really wanted to ask this. Well, you know, if your goal is to have a comfortable retirement or a decent retirement.

If your goal is to have passive income or, or have no money worries, what else are you doing in order to get there? And this was really interesting. The most popular answer was investing in shares and it's different from Kiwisaver, which also came up. So number one, the main thing property investors are doing is investing in shares, then KiwiSaver and saving.

But number three really floored me actually. I didn't expect this to come through so frequently, and come up so much, which was starting a business, a lot of property investors out there were saying, yeah, okay, I'm going to start a business, or I am running my business or growing my business. Owning a business, then it was knowledge.

So acquiring more knowledge, or doing some sort of personal development. Number five was working. So whether that's to get a higher paid job or just working for money. And number six was paying down debt. So there are six main things that investors are doing to also work towards their goals. Shares, savings, starting in business, personal development, working hard and paying off debt and Andrew you've got a bit of a story about working hard don't you.

Andrew Nicol: I'll jump into that one in the second, the shares is an interesting one for me because I made the comment to someone last week, how often I'm seeing Sharesies, a portfolio through Sharesies is a cooperative, platform for buying shares in New Zealand, how often I'm seeing that appear on people's statement of possessions now.

So they're obviously doing a lot more advertising, particularly in Wellington it seems. And so people are directly investing in shares, I guess it's made it a bit easier for your average person to, invest in shares which is great. Having something else, so that you really diversifying that portfolio. The one that stood out to me as number three start a business. I can tell you now, buy property, cause it was a whole lot easier, but starting a business, I'm working with a few people who are actually self employed, or thinking about starting a business.

One I spoke to just last week. And what they have decided to buy property for is because they don't know how well this business is going to go. And so they wanted to have a horse in each race and have something to fall back on if the business wasn't successful. I thought that was a really interesting mindset. Now just what Ed's eluding to is a story that if ever you've been to any of my seminars I usually end with this.

There is a game in New Zealand called Family Feud. And because of the Nicol family fights over monopoly, and there's been a few more fights in isolation. The game of Family Feud was bought out instead. So just it just creates all new family arguments. And the first card, and this is completely true, the first card that came out of the box, which is a question that you all have to answer. And the winner is the one that gets the most points.

Anyway, the first card that came out was, how do you get wealthy. And so I buzzed because I was sure that I knew the secret to success and wealth in my family and I said, property. Now property, there was basically what happened is they've gone out and asked a cross section of New Zealand, what they rate as the way of success to build wealth. And number five out of the six was property or real estate on the card is what it was called.

And my dad got the next go of answering what he thought and he said working hard, which I laughed at obnoxiously and, that was number two. So people in New Zealand, think that working hard is a much better option than property, which is very scary. Number one was saving which is even more scary. So your average human being in New Zealand thinks that saving and working hard is going to get you ahead further than property, that a very scary statistic.

Ed McKnight: Yes. And I actually used to watch Family Feud, great TV show, and it's actually kind of similar to the survey that we've done here because they go out and they ask the question and they just allow people to say whatever first comes to their mind. And so that's kind of really interesting that property is so far down.

I'm sure that if the list of those top six options, we are working hard saving property, whatever it was more people probably would choose property, but that kind of says to us, Andrew, that we've got a bit of a job to do to get out and educate the nation, to make property more top of mind because it is a real driver or a pathway to build wealth, to get a more comfortable retirement, build passive income, and have no money worries as investors have told us.

But look, let's wrap it up there. Now, don't forget to rate, review and subscribe to the podcast. It really does help us get the message out to more people and hey, if you want to take the survey, I would really appreciate it because this helps us figure out, well, what should we A) talk about on the podcast and what other content should we be creating?

And there are some really cool things that are going to come out of the pipeline directly because of the survey. So you can either go to. Opespartners.co.nz/survey or look, I'm just going to drop the link into the show notes, so tap or swipe over that cover art it'll take you right there.

Thanks for listening to the property Academy podcast. I'm your host, Ed McKnight, and I'm Andrew Nicol, and we're going to be back again tomorrow with even more daily strategies, tactics, and insights to help you get the most out of the New Zealand property market.

Until next time.