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Aim High Be Specific

Aim High Be Specific

Our latest data can be used to help set your property investment goals. Andrew Nicol explains how.

By: Andrew Nicol

1 September 2020

Us Kiwis are humble people. Even if we set goals, we certainly don’t talk about them - even among friends. That makes it hard for first-time investors to know what to aim for. It’s hard to know how to set a realistic goal.

To tackle this, I’ve just completed a study of 148 property investors’ goals. This looks into what each investor’s goal is, how close they are to completing it, and how many properties they’ll need to achieve that goal.

Because this data comes directly from our portfolio planning tool at Opes Partners, we can start to answer a whole heap of different questions.

For instance, you’d expect people who earn higher incomes to set more ambitious goals. That’s not the case based on the data.

In one case, a couple who collectively earn $500,000 annually has set the same goal as a couple who currently make $150,000. Both couples want to build a passive income of $200,000 through property.

The major takeaway from this study is that, in terms of passive income, most of us Kiwis pick round numbers and just aim for those. 70% of people choose one of six goals.

If the investor thinks in terms of an annual passive income, they’re likely to set a goal of $100,000, $150,000 or $200,000. If they think in terms of weekly income, they likely want a passive income of $1,000, $1,500 or $2,000 a week.

If anything, this shows the loose approach we take to goal setting, at least in the early stages of property investment. Us Kiwis tend to run with a ballpark goal and adjust from there.

The reason I’m excited about this data (link below) is that Kiwis can use it to peer into other investors’ financial lives without embarrassment – the data’s anonymous.

Above is one of the most useful graphs that came out of the study. The real beauty of the interactive version is that you can find real people who are like you. For instance, once you decided on a passive income goal, you can hover over others with the same goal to see how you compare.

Let’s say, like 35% of other people, you want a passive income of $100,000. Are you like the couple who have 10 years left before their goal who currently earn $100,000 a year? After working with a property adviser, they realised that, excluding property, they are on track to achieve 38% of their goal.

Their plan involves investing in four long-term buy-and-hold rentals to achieve their goal. Or, are you more like the couple who have 19 years before they want their passive income? They earn $150,000 a year and are on track to achieve 28% of their goal, excluding property.

They are forecast to need only two long-term rental properties to achieve their goal. For all you financial planners out there, this data isn’t here to replace the need for professional advice. But, coming from a country where we don’t talk about money with friends, it’s fascinating to peer into the property plans of 148 long-term buy and- hold investors to get a sense of what’s achievable.

This is especially true since for each investor you can see what their goal is; what they currently earn; how on track they are; and how many properties they need to hit their target.

My hope is that exploring this data gives regular Kiwis the confidence to say “These people are like me, they earn what I earn - I could do that!” To explore the data for yourself, go to https://www.opespartners.co.nz...