Investing in property is one of the simplest strategies to grow your personal wealth. It allows you to generate long-term income and hold a valuable asset, helping you create a better financial future.
With good financial management, expert advice and a home loan with great rates, you can open the door to a range of possibilities and benefits. Below we list the top six reasons to create wealth through a New Zealand property investment.
1. It’s Easy
Unlike buying stocks and shares, property investment requires little education or specialist knowledge. As long as you do your research, get professional advice and organise your finances, there is little risk of overpaying or making a poor purchase.
Property is an easy asset to understand, without any of the complicated terminology found in the stock market. Assessing the value of a property is fairly straightforward and creating a strategy is also simple. All you need to do is understand basic property investment principles like capital growth and rental yields.
Many people are hesitant to invest in property because of high prices and the state of the current housing market. In reality, property is far less volatile than other forms of investment.
For example, if you invest $100,000 in shares, you have no guarantee of what the investment will be worth in a few years. The value can’t be estimated by adjusting to the cost of inflation, nor can you accurately predict how social or technological changes might affect the success of a company you invest in.
If that $100,000 was used to buy two properties valued at $200,000 (each with a $50,000 deposit), you would have $400,000 worth of properties and $300,000 in mortgages. Consistent rental income will pay off those mortgages within 25 years, historically property in NZ’s cities doubles every ten years and can be tax free.
Rental income offers a consistent and generous cash flow. This allows you to pay off mortgages using other people’s (tenant’s) money. Good rental income also increases the market value of your investment property.
If your financing costs and other property-related expenses exceed your rental income, you can negatively gear the property. This allows you to offset your investment income against costs to reduce the tax you pay.
You can also claim a number of deductions on your rental income including rates, insurance, repairs and maintenance. With tenants and the government subsidising your purchase, property is one of the most affordable investments available.
4. Capital Gains
In New Zealand, capital gains on medium to long term property investments don’t attract tax. While some movements in the housing market can negatively affect the returns you gain, property generally increases in value over time.
New Zealand has a rapidly growing population, expected to reach six million within 50 years. The resulting demand for housing will increase property’s value and offer favourable capital gains returns over time.
5. Leverage Value
Your investment property can also be used as a working asset for further investments. For example, you can use the equity in both your home and investment property as security to borrow for another investment mortgage.
The financial leverage you access in property is far greater than a share portfolio. This makes property investment one of the most efficient tools for growing wealth.
6. Flexibility and Control
If you buy a share, you buy it at the market price with no options for negotiation. That price and future value can be affected by unpredictable factors like news and emotions. Property, on the other hand, is all about negotiation.
Property is also resistant to fluctuations in the market as housing represents a basic need. Unlike shares, if something happens to your property, an insurance company will cover it. Even if the housing market crashes, you’ll always have a tangible asset that will hold future value.
Investment Property Finance Made Simple
If you’re ready to invest in property, speak to iLender for a home loan with the best rates and lowest deposits. Our expert mortgage brokers have extensive experience helping investors climb the property ladder in New Zealand.
With access to bank and non-bank lenders iLender is still able to provide 80 percent finance for property investors.
Call us today on 0800 LENDER (0800-536-337) or contact us online with any questions you have about property investment.