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Two Big Fears Investors Face

Sue Irons explains why you shouldn’t be afraid to get into property investment.

By: Sue Irons

31 May 2018

Buying investment property to grow your wealth is a proven strategy.

Why then is it so scary for many would-be investors? A number of reasons, but in my opinion the two biggest are:

  1. The large amount of money involved:
  2. The fear surrounding the unknown.

How Much Is That Debt?

Taking on a lot of debt can be scary, but it’s important to put that debt into perspective.

Unlike your credit card, the debt you take on to get onto the investment property ladder is considered “good debt”. Why? There are several reasons:

  • the debt is secured by the property;
  • the expenses incurred with owning the property are tax deductible;
  • the investment property increases in value while your tenants pay for the debt and the upkeep of the property.

When you consider how “good debt” can help you grow your wealth it will be much easier to accept taking on the necessary leverage to buy an investment property.

But What If I ...

Buy the wrong property

Could you buy the wrong property? Sure, but you could also buy the right one. Truth is, buying an investment property is fraught with risk, but so is investing in stock, building your own business, or any number of wealth creation strategies.

To combat this fear you can:

  • do your due diligence in the suburb where your investment property is located
  • establish an exit strategy before you buy so that once your pre-determined parameters are “triggered” you can make decisions based on your investment strategy, rather than respond to the emotional upheaval that changes can bring.

Lose my job

Nearly everyone, at some point in their career, has been made redundant.

While it’s inconvenient, frustrating and perhaps even a bit scary, you can make this fear a lot less powerful by doing the following:

  • build up sizeable buffers for each property
  • set up an emergency fund for personal expenses
  • use tax refunds, bonuses, gifts … any extra money you can and build up your offset account(s) to cover any potential investment property shortfalls and to pay your personal expenses.

Even though you should have an exit strategy before buying each investment property, when you have money set aside you gift yourself with time to make good decisions about your financial situation.

Other strategies you can use to ease your fear of investing in real estate include:

  • buying cash flow positive or cash flow neutral property
  • trading your investment property if necessary to shore up your cash reserves.

Whatever your fears, the best way to combat them is to educate yourself and to make plans to minimise any potential negative impacts on your wealth creation strategy.

Bottom line, there’s nothing wrong with being afraid, but it’s important not to let the fear overwhelm you and prevent you from taking action.

If you are interested in discussing similar matters with like-minded property investor people and professional coaches, feel free to join us at our next FREE Property Investor Night near you. www.positiverealestate.co.nz/nzpi

Sue is the Head of Education and Director of Postive Real Estate (NZ) Ltd and also one of NZ's leading experts with a diverse knowledge of all aspects of property investing. Sue spent the last 15 + years immersed in the property market. Sue speaks at and runs many property events and has mentored many of New Zealand’s leading investors. Sue works with her investing clients to assist them to grow and enhance their portfolios, whilst keeping her eye on their end goal – financial freedom and choice. [email protected]

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