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Don't Believe Everything You Hear

Solid planning and surrounding yourself with professionals who specialise in property investment can reduce the risk of a bad buy, writes Debbie Roberts.

By: Debbie Roberts

1 December 2021

Opinions Are Like Belly Buttons

Everybody has one, and a lot of the time they are pretty useless. Why would you listen to someone’s advice about property investment if they’ve never owned a rental property before? Your friends and family will most likely have your best interests at heart, but without the background knowledge required they are not likely to be in the best position to give you the guidance you need, and buying a home is vastly different to buying an investment property. The media is full of doom and gloom horror stories about bad tenants and bad landlords, not to mention commentary about whether it’s a good time to buy, and talk about median and average prices making it unaffordable for everyday Kiwis. If you believe everything you read or hear you’ll never buy anything, or worse, you’ll buy the wrong thing. You can reduce the risk by increasing your knowledge about investing, surrounding yourself with a team of professionals who specialise in property investment, and by creating a solid plan for how to achieve your investment goals.

Choose Professionals Carefully

Most property investors who have been around a while will be able to share their stories of so-called experts who gave them horrendous advice, but they didn’t realise it until after they had learned the lesson the hard (and expensive) way. For example, having the wrong structures (or no structures) in place for property ownership. Or having all lending with one bank so all the properties are cross-secured against each other. Or believing everything a salesperson says who is promoting the benefits of negative gearing and more recently the tax benefits of new builds, which seems like it makes sense when you look at their pretty charts and graphs until you realise the tax benefits are all ring-fenced now so that doesn’t help with the negative cashflow (which just keeps getting worse as interest rates increase), and they haven’t even included the full cost of the investment in their figures anyway.

So, if you are trying to work out who you can trust when it comes to a team of professionals, ask other experienced investors who they use as a lawyer/accountant/mortgage adviser/ financial adviser etc, and if they would recommend them. If an adviser is only willing to help you with investments that their company (or sister company) puts in front of you, rather than deals you find outside their company, then perhaps their advice isn’t really impartial or unbiased and it might not actually be in your best interest. We have been horrified by some of the financial advice dished out over the past year or so, all because of vested financial interests in properties being promoted for sale. Financial advisers are legally obliged to fully disclose any potential conflict of interest, so make sure you ask about it if they haven’t been completely upfront, and get them to put it in writing, along with the amount of commission or referral fee they stand to make.

The Key To Long-Term Success

The type of property and strategy that is right for you might be a financial disaster for someone else. Don’t rely on things you have no control over, such as capital growth and tax benefits. We are past the peak of the boom now, and tax benefits can change again (for better or worse). You need to have a solid plan in place to improve your chances of success for the long term. As Michael Yardney once said: “Property investing is a game of finance, with a few houses thrown in the mix.”. If you get the mix wrong, it can really stop you from reaching your full potential financially. So do your homework and choose your professionals carefully, especially your financial adviser. Preferably choose one that’s experienced, not just a one-trick pony, and one that is not restricted to just one part of the country (because that might not be the right part of the country for you to invest in), and ideally one that doesn’t have a vested financial interest in everything you purchase.

Property Apprentice is 100% NZ owned and operated, and is NZ’s leading property and real estate investment coaching program. With their lifetime coaching support program, and no vested financial interest in any property you purchase, they are there to help you to reach your property investment goals.

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