Current property market conditions are becoming more attractive for aspiring home buyers and investors alike. As property investment coaches and registered financial advisers, we see the importance of combining this motivation with knowledge and a plan, in order to avoid making a huge financial mistake that could prevent you from reaching your long-term goals.

Navigating Your Personal Financial Roadmap

Before you dive head first into property investing, take an honest look at your current financial position. What is your income level? How much deposit or equity do you have available? What level of risk do you feel comfortable with, and what do you want to achieve from investing in property? It is important to speak to an independent mortgage adviser early in your investment journey.

Getting Your Deposit Together

We have seen over the past decade, as coaches, that the desire to own property is often more important than the amount of money you earn. It is literally a case of “where there is a will, there is a way”, and of course, a good plan. If you don’t have available equity, you will need a plan for how you are going to raise a deposit.

People on higher incomes often overlook splurges and save less for a deposit while people on lower incomes often have a more disciplined approach to budgeting while saving for a deposit. Wherever you stand, you may need to make short-term sacrifices to achieve your long-term goals.

‘Those on lower incomes, in some cases minimum wage, can end up with at least as much success sometimes more than clients on six or seven-figure incomes’

Seizing Opportunities

If you have owned your own home for a few years, you might already have enough available equity to fund a deposit on a rental property, so you don’t need to worry about trying to save for another house deposit. You will, however, need to have enough provable income to enable you to service a mortgage on a rental property in addition to your current mortgage.

This is where it becomes important to understand your borrowing capacity, and how your long-term goals fit with that. If you haven’t yet purchased a home, but you have saved a deposit or had help from the bank of “Mum and Dad”, you might be better off purchasing a rental property as your first step.

The reality is that rent in many parts of New Zealand can be cheaper than owning the property, but there are also plenty of other areas in New Zealand where market rent is enough to cover the cost of owning the property. It might make more sense for you to stay renting, and buy rental properties elsewhere to get you started. Purchase prices vary across the country also, so if purchase prices where you live are unaffordable for you, then it is worth considering investing elsewhere.

At the moment, it is possible to purchase an investment property with a 20% deposit, as the Reserve Bank restrictions have been lifted for a period of time, so you might not need as much deposit as you think. Once you have a deposit together, it is important that you pay attention to your spending habits for at least three months before applying for a mortgage, because the banks certainly will!

How Much Do You Want It?

What we have found from working with clients who have a wide range of incomes, is that those on lower incomes (even in some cases, minimum wage) can end up with at least as much success (sometimes more) than clients on six or seven-figure incomes.

Regardless of your financial position, it is important that you have a good plan in place, and are motivated and determined to succeed so that you are able to achieve your long term goals.

This Is Not A Swimming Pool

Property investment is not the same as buying a home. The more you learn, the lower your risk, and the more successful you are likely to be. We have several free resources available on our website: www.propertyapprentice.co.nz including live online training sessions.