Property data firm Cotality says investors seem to be returning to the property market in recent months.
Photo: RNZ
Most property investors getting into the market at the moment are doing so for the wrong reasons, one property coach says.
Graeme Fowler is the author of 20 Rental Properties in One Year. He is also a property coach.
At one point, Fowler owned 80 rental properties, although he has reduced that number in recent years.
Property data firm Cotality said investors seemed to be returning to the property market in recent months, particularly those who only owned a small number of investments.
They were 25 percent of the market in July, from 21 percent in mid-2024.
But Fowler said about 95 percent were doing so with the wrong motivation.
“Before any new investors buy residential rental properties to invest in, their strategy and results they are wanting to achieve is more important now than ever before.
“Investors need to be buying properties that make sense at the time they are buying them, and never ever be concerned about what the market is doing.
“Plus the end goal should be to have their properties fully paid off eventually to provide income, not use interest-only loans with the hope that values will go up.”
He said investors who invested that way would “pretty much always” do well over a long period of time.
“With yields a lot lower than they were when I started investing, as well as more government regulations on maintaining your rental properties now, it is a huge gamble to invest like people have done in the past.
“Many were lucky to get away with prices increasing to a point where it saved their highly risky strategy, but I don’t think anyone following previous investors’ advice will do well.
“Money management, financial intelligence, goals to work towards and a strategy or plan that will succeed in any market long term is what’s needed.
“There are a lot of things investors can do to get a bit of a jump start and gain quick equity, such as buying well or adding value to the property. If this is done with each purchase, it will accelerate their success if done well.
“Once the property is set up either as a good purchase, or value has been added in some way and the finance is in place, leave it.”
He said people who refinanced down the track could be caught out.
“This is most common in people’s own home when they refinance to buy cars, do renovations, a holiday overseas… It is a recipe for disaster whether it be your own home or rental properties.
“Stick to the basics, have the end goal in mind and become more financially intelligent, please read about and understand money, banking and finance.”
Another property investment coach Steve Goodey said it was common at the bottom of a market cycle for people to buy hoping to make capital gains, because properties looked cheap.
“Which is pure speculation because people think ‘it must get better soon’, well it might get worse.”
He said if Labour were to win the next election and return to its previous plan of removing investors’ ability to claim their interest costs against their income for tax purposes, “the busiest piece of real estate will be Auckland airport.”
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