The issue is that no-one can time the market perfectly. You won’t know when the bottom of the market was until 6 months in the future when the data comes out and shows a consistent pattern.

In the end, Mark and Anna decided to go ahead with their investment because they realised they were already timing the market.

They’re investing at a time when property prices have fallen substantially and they are getting a good deal.

And although prices could fall another 0.5% next month, they could also stabilise, or go up by 0.5%. Locking in a deal today gets them a step closer to the financial future they want.

Over the long term an extra 0.5% either way won’t make a major difference. What matters is getting a good deal in the current market.

Hurdle #6 – media headlines

The media loves a Doomsday headline about the housing market. I know, I’m a journalist and worked at Stuff. We love a good negative headline.

But the unintended consequence of this is that investors are scared of making a decision.

This can mean investors don’t prepare for their retirement and then get scared by headlines that read “Most Kiwis not prepared for retirement”. It’s a never-ending cycle.

For instance, Jeff and Jamie were considering an investment property. Then they read the headline “Rents are falling”.

They sent this to their property partner and asked what he thought.

Once their property partner had the chance to go through the article they realised rents were in decline across most of the country.

However, rents were actually rising in the area Jeff and Jamie were investing in.

So, if you were like Jeff and Jamie, you might get freaked out by that headline too, and miss out on a good deal. You’ve got to look past the headline and dig into the detail.

This isn’t said to bash the media. It’s just to point out that news content is not there to help you make an informed financial decision.

This is why you need to speak to your adviser about alarming news headlines like these.

Financial advisers keep abreast of the news, and they will be able to give you a more balanced and accurate take on events.

And even if rents were falling in the area they were investing in, it’s important to note that rents and prices fluctuate. They might go down 0.5% this month and up 1% next month.

The individual bumps along the road don’t matter. What matters is the long-term trajectory.

Hurdle #7 – interest rates and uncertainty

There’s no missing it: Interest rates, like prices of everything else, are rising. Record low interest rates have sent inflation soaring to 7.3% in June 2022.

This has forced the Reserve Bank to increase the OCR in an attempt to temper the economy.

One of the knock-on effects of this (as well as a higher mortgage repayment) is a much higher weekly top-up.

The top-up amount is what scared Sally and Sione out of signing a deal in South Auckland. They figured it would be worth just waiting it out a year or two, for when interest rates go back down and they could afford the top-up.

In practice, a temporary hike in interest rates may not actually translate to a huge increase in the top-up amount.

Let’s say you budget for a 5.75% interest rate next year. What would happen to the amount you have to top up a property if the interest rate increases to 6%?

If you buy a property worth $800,000 (and borrow all of the money), then you will pay extra interest of $2,000 a year, or $38 a week.

The question you need to ask yourself is, “If that happens, will I pay an extra $2,000 for this property if I wait and interest rates start coming down?”

In this case, Sally and Sione realised that when interest rates start coming down the property price could easily increase 10x that.

So, even if they did have to put in an extra $38 a week, it would be worth it in their eyes.

If you are struggling with the top-up for an investment property, learn the 7 strategies to manage your top-up as interest rates rise.

Conclusion

How to handle emotions in property investment

This article isn’t about us telling you what to do, or telling you not to have concerns, questions or emotions about investing.

Investing in property is a big commitment.

However, if your goal is to build a property investment portfolio, then it’s important that you manage your emotions so you can make an informed investment decision.

Opes Property partner Toby Pascoe says he feels a “pit in his stomach” seeing a client pull out because of cold feet.

“I hope they will press on. They’ve worked so hard to get to that point – to see it all fall over is disappointing for the investor, more than anyone else,” he says.

Write your questions or thoughts in the comments section below.