Property Investment
2 min read
Author: Andrew Nicol
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Do this before you invest … or take on more debt.
When you’re about to buy a property you might do some rough numbers and think: “Hmmm… I’m not sure. Can we really afford it?”
There’s one way to truly figure it out – The “Can I Invest?” Test.
It’s simple.
Let’s say you want to buy an investment property. The rent doesn’t cover all the costs. So you need to top it up by $200 a week.
Before you commit to buying it … test yourself.
Put that $200 aside every week, as if you already bought the property.
Here’s the specifics on how to set it up –
To get real specific. Here’s how to set up the test in 4 minutes:
4 mins (max). A couple of pro tips:
Pro tip #1: If you get paid fortnightly, just do one fortnightly payment ($400 in this case). It doesn’t have to be weekly.
Same deal if you get paid monthly. Just do a $800 transfer once a month. But it must be automatic.
Pro tip #2: Set it up to automatically transfer the day after you get paid.
That way, the money’s already moved before you even think about spending it.
After 2-3 months, check in:
If you’ve managed to put the money aside without touching it …
Congrats! You’ve passed the test.
If not, then you’ve learned a good lesson too … you’re not quite ready to invest (yet).
Pro tip #3: Try this for up to 3 months. That’s enough time to see if you can afford the payments or not.
The “Can I Invest?” Test isn’t just for property.
Thinking about upgrading the family car? Try setting aside the extra $70 a week for the new loan – before you sign the paperwork.
First home buyer? Figure out the difference between what your mortgage would be and the rent you pay now. Then set that aside, the extra money in a ‘Can I buy a house?’ account.
This works whether you are investing … or if you are taking out debt to buy a car, house (or anything else).
Pro tip #4: Not everyone needs to do the test. It’s more if you’re on the edge and you’re not sure if you can afford an investment or not.
If you find after a few months it’s just too tight – at least you learned a good lesson … investing isn't the right decision today.
(And you have some extra money in a separate account).
But that doesn’t mean you can never invest.
Your financial situation could change. Maybe you:
When these things happen – take the test again.
So, if you want to really know if you can invest...
Take the “Can I Invest?” Test.
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.
