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How to build wealth with property investment

By Mike Henderson / February 20, 2019 / Share:

 

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Unfortunately, property investment isn't an easy road to riches. There's a fair bit of knowledge, time and hard work needed to make sure your investments succeed - from dealing with tenants to putting together a long term strategy. 

To get you started the right way we've had a closer look at how exactly property investment in New Zealand can help you build wealth. 

Buy property for capital gains

The New Zealand property market is slowing down slightly, with the national average house price dropping by 1.8 per cent over the two months December 2018 and January 2019, according to Real Estate Institute of New Zealand data. You might think this makes it difficult to buy for capital gains but that's not the case. 

Let's look to the Auckland region as an example - the city's average price fell by 2.4 per cent in January alone. However, if you look closer you'll see Manukau city's average value actually increased by 9.5 per cent during that same time. Finding pockets of value within your region, like Manukau, allows you to buy and hold to make the most of capital gains even when the market is performing poorly.

Look for up and coming neighbourhoods

It's easy to suggest finding areas that are outperforming the wider market and buy for capital gains, but how do you actually do it? The first step is to look at which area in your city is undervalued.

In Auckland Manukau and Waitakere fit the bill, with some of the cheapest average house prices on offer in the city and unsurprisingly - the biggest capital gains in AKL at the start of 2019. 

Next search for an affordable home in the area, preferably in a desirable location near transport, amenities and shops. If possible try and find a property that you can add value to without spending much money. Homes that need simple fixes like a new interior paint job, new carpet or some garden work can be quickly improved without breaking the bank. Doing this helps boost your property's value so that you can build equity quickly. 

Buy well or when the market's heading up

Capital gains are never a sure thing but it's possible to buy in a way that maximises your chances. If you've got your eye on property in a certain area check current price and sales movement statistics. If sales are slowing down and prices are dropping take your time and don't rush to buy. 

In slow markets buyers often have more power than sellers - so you may be able to find a deal for less than the market rate with the help of a local real estate agent. If not, it could be worth waiting until prices plateau so that your property doesn't lose value straight after you buy. 

Re-invest your cash flow and equity

To succeed as a property investor you need to have clear goals and a solid strategy that will help you achieve them. One of the main decisions you'll have to make is how to reinvest your cash flow and capital gains. 

Do you want to slowly build equity in your home so that you can live off the rental income in the future? Or are you looking to buy more property using equity from cash flow and capital gains? 

Whatever you do, if you make the right decisions now you could be in store for a more comfortable retirement and a better future for your kids. You don't have to do it alone - speak to a local property manager at the Professionals today to make sure you're on the right track. 

My house. Your Castle

Topics: property investment, investment property

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