Last year when I purchased an investment property in Christchurch, I paid a professional property finder (someone from our own iFindProperty team) to source the investment for me. It was cashflow positive and I’ve worked out that even with the inability to depreciate the interest in the future, this property will still be cashflow positive … albeit not as much. So, a good outcome.
Also last year: my business partner Nick and I purchased a property in our own town of Rotorua. We know the market and we went cash unconditional to get a good deal. Good story so far…
Then we decided to spend a lot of money on renovating this property and furnishing it as an Airbnb. It’s a large four bedroom home so this was a large expense, and we spent a few months getting it ready. So disorganised were we that we missed the crucial time frame to have it ready for Christmas. We’ve since had low occupancy at the property as it was listed in January.
You might want to ask at this point, had either of us ever had any experience running an Airbnb? And if not, did we think to get some good advice? The answer to both of those questions is no … and now we are paying for “winging it”. As a professional investor who teaches people how to invest safely, I failed to follow my own advice when working in a new domain. I’ve learned my lesson and have started the process of getting professional advice on how to effectively run an Airbnb; it’s been a valuable learning curve.
You will be aware that we have recently had a raft of legislative changes which have affected property investment. In my opinion these are (mostly) poorly thought out measures which are going to do little to solve the real problem which is a supply issue. It’s disappointing to me that the Government has chosen to blame property investors for a housing shortage, when it would be more useful to work with us to help house fellow New Zealanders.
But the good news is that people are no less motivated to plan and care for their financial futures. Change creates opportunity too, and we see now in this new market that less investors buying means there is less competition, particularly in the type of properties that first home buyers don’t seek, such as multi-unit properties and those in need of a renovation. You’ve got to love ugly: it’s going to be much easier to buy these houses below value and add equity. But you need to know what you’re doing, and if you don’t, it’s worthwhile paying people who do. I’m talking about accountants, lawyers, property finders, property managers, valuers, renovators, etc. It’s imperative that you build a team around you to protect you. This is what we do at iFindProperty – all of our clients get introduced to our team in each market of trusted professionals.
The moral of the story is: don’t be afraid to pay good professionals for good advice. Don’t wing it. Especially not now. Property investment is a business and carries the risks and benefits of such. The new tax changes mean it’s much more challenging now to obtain a property that performs like an investment rather than a liability.
I often use the analogy that it’s poor rationale to try and save money by being your own dentist. The result will not be a good one.
This article was published in the May 2021 issue of the New Zealand Property Investor Magazine and is shared here with permission from the magazine.
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