Playing the long game with property investment

For many New Zealanders looking to take the first step in their investment journey, property may be on the cards. But with an ever-fluctuating market, it can be challenging to determine when and how to enter the market.

While investing in property can be a smart choice, allowing you to grow your assets and generate a passive income, don’t be fooled; venturing into property is not always a ‘set and forget’ investment choice.

Host Megan Smith was joined on our Home Truths podcast by Jason Waugh, general manager of Lodge Rentals, and investment legend David Kneebone, to discuss what it takes to become a successful property investor.

‘Time in’ the market rather than ‘timing’ the market

Many investments are a long-term game and property is no different. David describes property investment as a “get rich slow scheme, as opposed to horse racing, Bitcoin, and other investment opportunities out there.”

He says if you are in it for the long haul, the sooner you enter the market, the better.

“Time in the market rather than timing the market is key, you can’t pick the top or the bottom of a market. You simply must get in.”

 For those questioning whether now is the right time to purchase an investment property, Jason says “buy now.”

“If you look back through the decades, the value of property is always on an increase. It dips and dives all over the show from time to time, but it always increases.

“Demand for rental properties is at an all-time high in Hamilton at the moment. Now is a very, very good time to buy. But a lot of people procrastinate, wait and consequently miss the boat. Buy now.”

How do I know if I can afford to get into property investment?

We now know that property investment is a long-term game, but how can you identify if you can afford to get into the market.

David says that personalised financial advice will set you up for success in current and future market fluctuations.

“The first step is approaching your bank where they will perform stress tests over your financial picture. Here they will ascertain your income versus expenses, equity in other investments, and what deposit would be feasible.

“You don’t want to be overstretched, but you do want to stretch yourself to a level of discomfort, and I would suggest your bank manager would be your first point of call in that regard,” says David.

Boots on the ground

Budding investors can find a plethora of information readily available online, but Jason stresses the importance of talking to experts with skin in the game.

“A lot of people are forecasting a lot of different things, but that is all they are – forecasters. They don’t necessarily know what is happening on a local level.

“The missing link with a lot of investors is that they don’t come to someone like ourselves at Lodge Rentals who manage investment properties day in, day out and get our advice.”

Establishing what type of property is in demand, what suburbs, and what size house can prove to be a hugely valuable tool for investors, Jason explains.

“Any investment property in Hamilton is a good investment, but some investments are better than others,” David adds. Talking to the experts early can set your investment up for success, bringing you higher returns and a better experience.

Why Hamilton?

With Hamilton’s population on the increase, Jason sees the city as positively positioned to reap the economic benefits of this growth phase.

“On average we sign around 135-140 leases per month, and about one-third of those are coming from out of town, so that’s new people into the city which is exciting.”

Hamilton is an attractive place for residential investment for several reasons, namely its position in the high growth ‘Golden Triangle,’ a term economic commentators use to describe the geographic area containing Auckland, Waikato and the Bay of Plenty.

Investors can also delight in the resilience of the Hamilton rental market says David, who has huge confidence in the durability of the region.

“There were certainly worries when COVID struck and with the university and the Polytechnic, overseas students not coming frankly hardly made any difference to the student rental market, which we thought was exposed.”

Building your portfolio? Invest in a property manager

Once someone has a foot in the door and their first investment property, how should they go about building their portfolio? Well, employ a Lodge Rentals property manager and spend time in the game, says Jason.

He adds that enlisting a property manager can be a very good economic decision, as over the last five years the rental industry has experienced massive change.

“If you are managing your property independently and don't know what those changes are or understand how to implement them, there are consequences including financial penalties,” says Jason.

“For the sake of paying us to manage your property on a day-to-day basis, it's cheap compared to the penalties and fines that we're now starting to see come through the Tenancy Tribunal.”

Employing a property manager also allows you to refocus your attention on building your portfolio and investigating other avenues of property investment, while the property manager does what you don’t have time to.

David argues that having a competent property manager that you can trust transforms your investment experience. “I certainly set and forget and let the property managers do all the worrying.”