The potential benefits of investing in property are hardly a secret. But for most people, the question is where to start and what to know. Here, we talk to the property experts at Du Val Group on the five crucial things to think about when considering a long-term investment in property.
1. Generate passive income and build generational wealth
If you find yourself in a position to invest, finding a property to put on the rental market could generate passive income, and offer up an opportunity to create significant generational wealth. But it really does come down to securing the right kind of property. “Smart investors buy well-located properties, the type that are in continuous demand from renters and are close to amenities such as schools, shopping centres and transport hubs,” says Nerissa Gibson, Du Val Group’s Sales Director. Using the Group’s portfolio specifically as an example, Gibson continues, “our property sites, while they’re not in central Auckland, are located in some of the City’s highest growth areas and are close to key transport.” Investing in the right type of property increases the chance of capital gains and a positive growth trajectory for rental returns. This could see your money working harder for you than if you choose, instead, to put it in another market. “There is yet to be an investment entirely free from risk,” Gibson continues, “but compared to other types of investment, there are some real upsides to property. Using it to build generational wealth, for example, is a smart move, as it’s a highly effective way of diversifying an existing portfolio, creating passive income and leaving a lasting legacy.”
2. Gain leverage and grow
Often overlooked is the fact that property is one of the only investments that can be leveraged, where lenders are willing to loan money using a property as security. As the value of your property increases, your ability to leverage the equity created provides an opportunity to buy the next one and so the investment cycle, and potential wealth creation, continues.
3. Diversify your portfolio
Anyone with an investment portfolio will know the importance of diversification (it spreads risk due to the fact that different assets will do well at different times) and property is one of the best ways to do that. Real estate is a long-term investment in a market that is generally regarded to be less volatile than others and it can be used to generate wealth during less stable times. As Gibson from Du Val Group explains, “while property doesn’t completely eliminate the risk associated with investing, it can help manage the risks which other types of investments are exposed to such as a rise in inflation.”
4. Consider buying off the plans
Perhaps one of the less talked-about areas of property investment is the raft of benefits that can be garnered from purchasing a piece of real estate before it is even built. To start with, the potential increase in the value of the property during the construction period (even though it’s uncapitalised) can be life-changing, but beyond that the loan-to-value ratios of new builds can be lower which means the initial deposit paid to secure the property can also be smaller. This type of investment is what the Du Val Group specialises in (offering a range of properties available to buy from the plans), and is an area in which, as Gibson says, they’ve seen a number of buyers make significant gains. “Our Rata Terraces development is a great example,” Gibson explains, “we had some buyers experience capital gains of nearly $150,000 by the time they had settled on their property.
5. Now is the best time
It is a common misconception about property investment that to do it successfully you need to have bought at ‘the best time.’ It’s actually time in the market that is more important. In fact, most investors are not so interested in what might happen next year and instead, are keeping an eye on the demand for property and rental prices over the long term. And given property generally increases in value over time, it’s logical that the longer you hold the property, the wealthier you are likely to become. As Gibson says, “is now the right time? We’d say absolutely, the sooner you get into the market, the sooner you can reap the rewards and start building your wealth.”
Neither Du Val nor any of its related entities are financial advisors. The information contained in this article is not personalised financial, legal, accounting or investment advice. The information in this article has been provided solely for information purposes and is of general nature only. You should seek your own financial, legal, accounting, and other advice.