Why Property Investment?
There are many very good reasons New Zealand investment property is so attractive. Here are a few of the main ones.
The NZ Superannuation is not enough
By 2030, 1 in 4 New Zealanders will be over the age of 65. The NZ pension is a whopping $357 per week after tax for a single person and $274 each for a couple. If you are retiring today you are likely to spend between 20 and 25 years in retirement, and for most of us the NZ pension is not going to be enough to live a comfortable lifestyle (that’s assuming the pension is still available when you retire, which is becoming increasingly unlikely).
Leverage is when you buy an investment property using borrowed money instead of using your own. Leverage can accelerate your investment return as you get your return based on the amount invested not just the money you put it.
You can use the equity in your home
If you have equity in your own home then you can use this to borrow against to purchase an investment property. This means you don’t have to save a deposit.
There are several tax benefits for investing in residential property. For example the expenses you incur to generate your rental income will most likely be tax deductible.
Rental income is the money your tenant pays you to live in your investment property. If this is over and above the expenses you incur to own that property then you will make an income. It is most likely that in the short term most of the income will go towards expenses, including paying down the mortgage. When the property is paid off then it will provide you with a good income.
Over time your property investment will go up in value. Sometimes property values will go down but the majority of the time they increase over time. Some areas have better capital growth than others. Often the areas that have the best capital growth will have lower rental yields.
You can have control over most parts of your investment
One of the biggest advantages of buying an investment property is the control you have, unlike other investments. You decide on the price, the structure of your loan, the amount to spend on improvements and how much work you will do yourself in terms of management and repair versus how much you pay others to do. All the decisions are yours.
The security of bricks and mortar
When you buy an investment property you’re buying a physical asset. Kiwis often prefer the security of owning an investment property compared to other investment types such as managed funds or shares.