Property Investment
Private Property issue #141 - Make 2025 your year
Make 2025 the year you grow your wealth. Learn 3 simple steps to get started with property investment and take your first step today.
Property Investment
3 min read
I’m guilty.Â
I talk lots about the good side of property investment.Â
But, at some point – your properties will annoy the heck out of you.Â
And to make the big money through property … you have to get through the times when you think: “property investment sucks!”
So, here are the top 3 reasons why property investment isn’t always that great. That way you’ll be able to figure out if investing in property is right for you.
#1 – It costs you money and impacts your lifestyle
I Â just recorded a podcast with Becky.Â
She’s a single mum and a teacher in Wellington. She came on the show to talk about how property investment can create financial strain.
She bought an investment property while interest rates were going up. And the rent didn’t cover all the costs.Â
And while that’s normal for many investors, it still impacts your lifestyle. So Becky:
- Got a flatmate
- Switched from a $65-a-week gym to a $15-a-week one
- Cut back on nights out, concerts, and activities on the weekend.
- Took on more responsibility at work to earn more
Though there were some things she wouldn’t compromise on. She still wanted to feed her and her son really good food.Â
And she still wanted to pay down her home mortgage by more than the minimum amount. That way, she could still get debt-free faster.Â
Now, if you earn good money, investing a couple of hundred dollars a week in property might not impact you.Â
But, if you’re on a single income, it can take more sacrifice. Investing can take $200 - $300+ a week depending on what you buy and how big your mortgage is. At least, at today’s interest rates.
But, when I asked Becky if she’d do it all over again, she said: "Yes." Because she’s investing for her future financial freedom.
#2 – You don't roll in money straight away Â
You often hear that property values increase by around 7% per year. Or the old “property values double every 10 years”.
(It’s not that simple, by the way).
But prices don’t rise in a straight line.Â
Sometimes, you buy a property, and prices rise.Â
Sometimes, they fall.Â
Sometimes they go sideways.
If you bought a property in June 2008, 4 years later, that property might have only gone up $12k.
But, 4 years later, that property might have gone up $203k.Â
As you can see from the above graph, property prices can be flat for years.Â
And then they take off. Then they are flat again. Or, they go down.Â
The good times come close together, but so do the bad.
Right now, we’re coming to the end of one of those downturns ... and are currently going sideways.
But, nobody knows the exact month or year when prices will really take off again.Â
And the only way to fight this is by staying in the market longer.
But, depending on when you buy, it might take a few years before you see good gains.Â
The issue is that you don’t know exactly when those good gains will come.
CoreLogic puts out a report every 3 months. They separate property buyers into 2 groups.Â
People who sell their properties for more money than they bought them for. And people who lost money and sold their houses for less than what they bought them for.Â
What separates them? Time in the market.
- People who lost money held their homes for an average of 2.9 years.
- People who made money held their properties for about 8.5 years.
#3 – Tenants can be a nightmare
You can do everything right: screen your tenants, hire a great property manager, maintain the property well … but there’s still a chance you get a bad tenant.
- Late rent payments
- Damage to your property
- Disputes that take months to resolve
Roughly 4-5% of rental properties go to the Tenancy Tribunal each year. So that gives you the ballpark chance that you have a decent dispute with your tenant per year.Â
Sure, there are tenancy law changes (that came in today) that will make life a bit easier for landlords.
But still, being a landlord isn’t always smooth sailing.
So, should I invest in property?
If you’re now thinking: "Wow, property investment isn’t for me."Â
That’s a win.Â
The goal of this newsletter isn’t to tell you that you must invest (even though that’s in my self-interest).Â
The goal is to teach you about property so you know what you’re getting into.Â
But if you weigh the good and the bad and decide: "Yeah, I can handle this. I’m in it for the long haul." … then that’s a win too.
Here’s the truth: Property investment can make you money. It can change your life. But, at times, it will also suck along the way.Â
Andrew Nicol
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.
