Property Investment
2 min read
Author: Andrew Nicol
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
One in three property owners loses money the first year they own it.
That’s the truth.
Because too many first-time investors think you buy a house, sit back, and watch it go up in value.
It doesn’t happen like that.
Here are 6 hard truths you need to know before you buy invest in property.
Property is an “oak tree” investment.
You plant the seed today. The shade arrives in 15 – 20 years.
Now, if you stick in the market, it can really work out.
Let’s say you buy a $600k property and it doubles in 15 years. You’ve made $600k.
But you only get that gain if you can hold the property for that long.
I recently met a 69-year-old doctor. He asked if he should invest in property. I told him it wasn’t the right fit for his situation.
15 years later he’d be 84. His life expectancy was 85. It wasn’t worth it.
The NZ Herald loves to say that property is “...no longer a sure bet.”
It makes me laugh. Property has never been guaranteed money.
Even in the hottest market (2006), more than 1 in 50 (2.4%) property sellers still lost money.
Today? It’s roughly 1 in 10 who sell at a loss.
You can make money. A lot of money.
But not every single property investor makes a lot of money all the time.
The major difference between the people who make and lose money is how long they hold.
The trouble with investment properties is … people live in them.
And people break things. The physical property wears out.
So you can easily have an issue with a skylight that costs $700 to fix.
One investor I know had neighbours who kept reversing into their house. They had to install a bollard.
At some point, your property will annoy the heck out of you. That's for certain.
So you need to be prepared for the odd headache.
The longer you hold, the more returns even out.
One of my favourite things to look at is the best and the worst returns ever in property in history:
If you timed the market perfectly and bought at the perfect time in history, your house would have gone up 30% in the first year.
If you completely cocked it up and bought at the worst possible time, the return is -14%.
But over 15 years:
That’s because over time, everyone has a few bad years and a few good years.
So it starts to even out. But you only get that if you’re in it for the long term.
Investing in property is controversial.
Your friends and family might think you’re greedy.
One guy on YouTube said that I’m “everything that’s wrong with NZ.”
But here’s the reality: New Zealand needs property investors.
If you invest in new builds, you add more homes to the country.
Renovators improve old houses and keep them in good nick.
But not everyone sees that.
There aren’t many property investors I know on yachts and helicopters.
The first 15 years of my investing were an absolute grind.
It’s not glamorous. It’s boring. But over time, boredom turns into wealth.
If you’re thinking about investing, you need to know what you’re getting into.
Property can be a fantastic wealth-builder. But it’s not quick. It’s not easy. It’s not guaranteed.
You’ve got to be able to stomach the bumps along the way.
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.
This article is for your general information. It’s not financial advice. See here for details about our Financial Advice Provider Disclosure. So Opes isn’t telling you what to do with your own money.
We’ve made every effort to make sure the information is accurate. But we occasionally get the odd fact wrong. Make sure you do your own research or talk to a financial adviser before making any investment decisions.
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