Tag Archives: Property investment

Property investment basics from a long-term investor

Have a plan

Back in the 1990s when rents were around $200 per week for the average home in Christchurch I envisaged owning 10 investment properties. My thinking was this would give me a gross income of approx $100,000 per year and with costs roughly around 50% that would leave me with a net income of approx $50,000 – not bad as a passive income I thought at the time. As critical as having a plan, is executing that plan. I still have clients thinking about committing to investment property 20 years after our first discussion!


The bank, the tenant and the tax man

These three will immediately put their hand up to help you build a property portfolio. With reasonable capital/equity and income most banks will back you to buy investment property and with current interest rates so enticingly low, it’s really a no brainer. Add to that national population growth which equates to tenants never being too far away from knocking on your door needing a roof over their heads. They too, driven by their need for accommodation will assist with your property investment plan. Then of course there is the tax man. While he plays strictly to the rule-book there are still good tax incentives for owning investment property in New Zealand. All your related expenses are tax deductible and with owning investment property is also likely your overall taxable income will reduce too. This makes it even more attractive if you are pulling a reasonable income and are on a higher tax code.


Using somebody else’s money

Property is one of the few investments I know of that you can actually make money from debt. While if you are only buying property for capital growth reasons you may be disappointed with the short term growth rate, it is interesting to note that over the years property typically doubles in value every 7-10 years in New Zealand. Getting a return on little or no cash down is about as good as it gets and it is important to remember that capital growth is based on market value not the size of your mortgage.


Good debt – bad debt

This is probably the most profound advice my accountant has ever given me and I have never forgotten it! I still find myself applying this principle in business and investment decisions. In a nutshell, good debt is money borrowed for assets that appreciate in value, while bad debt is money borrowed for assets that decrease in value. For instance a car loses value the moment it is driven out of the showroom while real estate largely increases in value. It’s not that difficult to determine which will bring long term benefit. Remember this basic investment principle and you are well on track.


A mortgage can be great savings scheme

Paying a mortgage can often be better than paying into a saving scheme. One, it is compulsory, two, it doesn’t get bigger (smaller if you also pay off principal). Thirdly, the cost of the mortgage you are paying off is offset by the return you are getting on that money. With property yielding a much better return than term deposits, it makes total sense to keep or invest in real estate in this low inflation, low interest rate era.


Not a get rich quick scheme

Property has never been a get rich quick scheme and my experience is those that are normally implode before you get the time to check out their validity or typically don’t stand the test of time. As above, with national population growth placing increasing demand on housing stock and with no more land being made, unquestionably pressure will remain on available real estate. An investor with a steady hand on the tiller and focus on the distant horizon is unlikely to go wrong with a long term focus.


Christchurch ideal for property investment

Clearly in the post-quake rebuild phase greater Christchurch now has a property surplus. On the scale of larger cities throughout the country, Christchurch has some of the most affordable real estate currently available and it is my belief it will not be sustainable for this to remain at such levels for too much longer. It is also my professional opinion that as the current heart and vibe of the city continues to build it will sell itself both nationally and internationally resulting in strong attractive growth. Investing in Christchurch sooner than later makes total sense for the astute and those poised to take action. Personally, I plan to hold my local property portfolio as I strongly believe we are on the cusp of another growth phase, besides I am struggling to find anything better to sink my funds into.


Right now I’m thinking that investment in bricks and mortar is a better option than money in the bank.

Team Griff has long term experience in the property investment market and are happy to assist you with devising a plan to build your property portfolio. Coffee is a great place to start!

Team Griff’s predictions for 2016

Team Griff's predictions for 2016-1Welcome to 2016! After a well-earned break, we’re pleased to report that Team Griff has hit the deck running, having held its first two auctions for the year and taking on a number of new listings. We’re excited for what the year ahead may hold and are ready to assist you with your real estate decisions – whatever they may be. Continue reading

Rent falls affect west Christchurch, not east

ELEVATELiz McDonald at The Press reports:

Christchurch’s falling rents are mainly in the north and west side of town, new figures show.

Bond figures show Christchurch’s median residential rent is now $394, after falling from a high of $431 in January as the increased supply of homes settles the rental market.

The latest figures reveal how rental patterns are shifting across the city.

In the northern and western suburbs ,including Redwood, Avonhead, and Broomfield to Halswell, rents in the past year have fallen by between 5 per cent and 12 per cent.

Inner suburbs show less change, with rents slipping less than 5 per cent in Sydenham-Woolston, Linwood-Bromley, Addington-Hoon Hay and St Albans.

The picture is different in the eastern suburbs of Burwood, Avondale and New Brighton, where red zoning has reduced the number of homes available and demand is more matched with supply. Rents in that area have risen slightly for two and four-bedroom homes in the past year, and are unchanged for three-bedroom homes.

Bernice Ireland, managing director of Quality Property Management, said rents in the east had less correction to make, as they had not risen as much as in the western suburbs after the quakes.
The cheaper rentals in the eastern suburbs were attracting tenants, including mortgaged homeowners awaiting repairs to their own homes, she said.

Agnes White, of real estate firm Agnes White and Associates, also noted that rents were “still holding up on the east”.

In suburbs were rents had dropped, landlords needed to be aware of the change, she said.
“The market has changed quite dramatically and there are not as many people looking for homes. There’s more properties available and rents have softened.”

The bond figures show that in the central city, where many new apartment complexes have replaced demolished ones, median rents for two-bedroom units have risen 6 per cent. Among one-bedroom central city homes, median rents have fallen.

Ireland said the market for one-bedroom units had slowed the most, after having been in heavy demand from workers arriving after the quakes.

Continue reading

Meet the property investors of Gen-Y

Before After

Meet Steve and Sarah – well they’re a little camera shy. 25 and 22 years of age respectively. With plenty of media coverage on young millennials being locked out of the property market, you might be surprised that these two are already on to their fourth property – and buying uninsured ‘as is, where is’ has helped them get there. Here’s a few things which have contributed to their success: Continue reading

Building a quality property portfolio


I found this article “Your End Game” by David Whitburn in the August issue of New Zealand Property Investor quite enlightening. Here are some snippets:

The three pillars of property investment are: cashflow, equity and growth. You will excel with a healthy mix of all three, and be stressed if you have nothing and probably say property investment is “too hard”. I know of property investors who bought property in towns in 2006 and sadly, seven years later they have had issues with rising rates, vacancies, tenant damage and reduced cashflow. … Then of course there are the Auckland and Christchurch property investors with undamaged properties, who in the same timeframe have had mild cashflow increased, but the value of their properties is up over 50% and still growing.

Passive cashflow
When you stop using your personal exertion to create cashflow (working for an income), you need something to replace it. This is where your assets must work for you. It is absolutely imperative to create cashflow.

My son’s old accounting teacher used to say, “Cashflow is the lifeblood of any business” – that simple statement equally applies to property investment.

Cashflow and equity
Some of you will have strong cashflow now, and others weaker cashflow. Some will have good equity, others poor equity. If you have weak cashflow and poor equity, you have more work to do. Equity is important but in the future when you have “retired” it is not as crucial as cashflow. Think of equity as an apple tree and cashflow as the apples. Having a big apple tree is likely to yield you more apples. These apples will feed you for a very long time. Having a tiny apple tree withering away producing fewer and fewer applies is stressful.

This is both growth in rents (cashflow) and also growth in house prices (equity). It is all about location. Buying in areas dependent on a single industry, or areas suffering population decline can prejudice your growth.

That’s why the Canterbury property market is a very exciting opportunity for any buyer of property -with the rebuild gaining pace we are beginning to see a number of Christchurch suburbs develop and become increasingly desirable. For example, the once considered dreary suburbs of Sydenham and Addington have been described by Lonely Planet as Christchurch’s “most dynamic neighbourhoods”. My opinion is that in Christchurch, you really can’t go wrong wherever you buy.

A quick word on negotiation

David Whitburn’s article ‘Negotiation – the art of the deal’ in New Zealand Property Investor is a good read:

Save yourself thousands of dollars by honing your negotiation skills. Being a good negotiator pays you a massive hourly rate. Too many investors negotiate hard over the comparatively small things, like the price of curtains and a plumbers charge out rate etc…But it is the big ticket items on which they should actually be negotiating – with vendors on price and with lenders for loan terms and good interest rates…

While I believe being a good negotiator is good skill to have and having a planned and structured approach will assist with good negotiation, I actually believe the bigger saving comes from simply taking action and doing it! Over the 24+ years that I have been selling real estate I have seen so many people not prepared to commit because they are waiting for that bargain or the big break. I believe the big breaks come from the small steps you make, executing the plan, and securing the property.

Land is a rare commodity…
The bottom line is that there is only a certain amount of land available and they aren’t making any more of it! The key is simply securing it and personally I think acquisition is a higher priority than cost.

Personally, when I look back at the property that I have purchased over the years I never lament over price paid but I often rejoice over having secured it.

Worth thinking about and as I said to someone today, you would have to be pretty stupid to get it wrong buying property in Christchurch at the moment!