Take action today to improve your investing

by Nick Gentle on May 26, 2017
Article appears under: About Property Investment, Goal Setting, Insurance, Investment Strategy, Mortgages, Renovations and Maintenance, Your Expert Team

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Article updated in May 2022.

One thing that separates successful investors is their drive to improve. They are willing to consider new ideas and methods, often challenge their own assumptions and are always looking for an edge.

The best time to learn and grow is always right now. It certainly does not matter if you are actively looking to buy because there is so much more to investing than "the hunt". A bit of down time can be the perfect opportunity to up-skill and optimise.

Below are some ways you could look to improve your investing right now.

Review your portfolio

If you find yourself stuck and frustrated, wondering how you will buy your next rental, it might be worth looking at your current portfolio. Are there any properties in it you don't plan to hold for the next 10 years? Now might be the time to sell.

In 2015 and 2016 I sold three properties and bought another. I asked myself “if I were to sell these tomorrow, with the opportunity of immediately buying them back or buying something else, what would I do?” I realised that I could put some of my equity to better use.

That shifted my mentality from "I'm stuck for a while" to "hey I can do something here".

Get some proper financial advice

Before you worry too much about doing things right, it's important to know that overall you are doing the right things.

I am not a financial advisor and won't go into different asset classes and retirement planning but this stuff is important to have nailed down well in advance of your golden years and the sooner you start to think critically about it the sooner you can make necessary changes. 

[May 2022 addition] Are you depreciating your chattels?

Chattels depreciation is the closest thing to free money that an investor is going to get. You can no longer depreciate a building, but stuff on this list can be written off over a number of years, and when you replace anything, the clock starts again. With interest deductibility off the table for existing properties for now, any reduction on your taxable income is very welcome!

The popular option for chattels valuations in New Zealand is Valuit and iFindProperty referrals receive a small discount when you book your valuation (we receive no financial benefit for this). Please get in touch and I will refer you on.

You should book a valuation soon after purchasing, but even if some time has passed you can catch back up. I was able to go back a few years and "look through" a renovation, although I wouldn't recommend it!

Review your mortgage and insurances

Your mortgage strategy

“What will interest rates do” is a favorite topic around the BBQ in NZ. Regardless if you favour longer fixed rates, short term rates, interest only, P & I or some kind of a mix, it is important that you have a strategy. What amount of cash do you need ready access to in the short term? What certainty on costs do you need long term?

2022 update: With inflation setting in and rates on the rise, investors will be getting nervous about what their mortgages might look like in 12 months time. Now, more than ever, a strategic approach is important.

If you are unsure, a broker is a great place to start. I formerly dealt exclusively with the bank and in recent times moved to a broker after one personnel change too many left me frustrated. I really appreciate the creative approach they bring to the table.

Extra (included because many investors are not aware of it): many banks offer some form of offset loans, where the net debt you pay interest on is offset by your deposits. It effectively means you get (save) your current mortgage interest rate, which will be higher than any term deposit, on your cash. Ask your bank or broker about these.

Review your insurances

One of the best moves I ever made, right up there with switching to a mortgage broker, was to work with an insurance broker.

Old Nick: Call the insurance company before settlement and get reminded when an automatic payment went out once a year. Not thinking about how increased build costs could impact me in a disaster.

New savvy Nick: Find out immediately when costs or coverage change with a summary of other options and a recommendation suitable to my property type. Also, my insurance is in line with replacement value at current build costs.

Having a good broker makes doing project work a lot easier since they do the heavy lifting for you. I am just finishing up a renovation in Wellington that I got project works insurance on during the post-earthquake embargo. My broker saw that my home insurance and my builders were both the same company and could set up cover for a large project at a tricky time. Me? I just got an email saying it was taken care of.

2022 update: The cost of building has skyrocketed in the last 24 months and most properties are likely to be underinsured. Now is a good time to run a calculator and see if you are fully covered.

Stress Test Your Position and Mitigate Risks

The phrase "Black Swan" comes from a popular book about allowing for negative scenarios that are extremely difficult to predict. Smart investors protect themselves from disaster while remaining able to profit from favourable moves in the market.

I was reminded about this recently by this article on inversion, a critical thinking skill where you imagine where you consider events that are the opposite of what you want to happen and act to avoid them.

Potential risks include interest rate rises (mitigate with a mortgage strategy), tenant damage (check your insurances and look at how you or your PM screen tenants), unemployment or illness (insurances again, also savings), a long vacancy (maintenance). There are mitigation strategies for just about any risk so take some time to think things through.

Learn and Grow

Get studying

I love books. Leaders in their field spend years becoming masters at what they do, distill the essence of all their knowledge in easily readable form and sell it for a fraction of the value of the information.

If you’ve got a spare $20, don’t blow it on smashed avocado and a coffee, that’s going to get you nowhere. Get to the book store or Library.

iFindProperty has some good ones – Click here

Network and research other strategies

Everybody has a different story and investors love to talk property. If you’re looking for a fresh perspective, why not ask others for theirs?

Somebody has in their own way been very successful in property in every property market in New Zealand. Big cities, small towns, new builds, old and tired properties, 3 bedroom homes, 8 bedroom "rent by the room" houses, warehouses, shops and everything in between. Find those people and listen to their stories.

Opportunity comes to those who are prepared and looking for it. Put some time into understanding strategies that have worked for others and I guarantee something will come out of if that helps you.

2022 update: Your local property investors association is an easy way to connect with like-minded investors. I've spoken at several associations and they are a great bunch of people. Find one close to you. If you're overseas, Auckland PIA runs a lot of online events and might be worth a look.

Pay attention to what is happening (or going to happen) in your area

Time spent researching zoning rules and changes, plans for schools and commercial precincts, population forecasts will never be wasted. New Zealand’s population is growing and demographics are changing. How can you position yourself to take advantage?

The material makes for dry reading sometimes however knowing the goals of local governing bodies is one more tool for the well prepared investor.

2022 update: This is especially worth digging into now because of all the housing density changes and the accompanying infrastructure investment announcements. Learning what is happening and how a project might work is valuable knowledge to have in your back pocket. Keep an eye open for council information evenings or other announcements.

Leverage iFindProperty to build your momentum

Are you too far away, too busy, too uncertain… or for whatever reason have just not progressed as much as you would like? Don’t feel too bad, most investors would say similar!

Our Property Finders are all investors themselves and understand that investing isn’t easy. We are set up to help people find, analyze, secure and put a team in place around investment properties across New Zealand. If you find yourself wondering why 3 more months have gone by with no action get in touch today.

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