By all accounts, rental properties have dried up as quickly as the vegetation around Wanaka of late - and the accommodation drought has brought with it both out-of-luck prospective tenants and steep rent increases to boot.

I heard of a case where a property was listed for rent, and, in a turnout of Christchurch-esque proportions, 16 very eager people instantly materialised, precipitating a frenetic bidding war. Conversely, in Dunedin, recent headlines have pointed to a dearth of commercial tenants and empty premises, with commercial landlords the casualties of both the global financial crisis’ hangover and the growing online retail market.

Like any business proposition, property investment brings with it risks and rewards, booms, busts and everything in between. And, as with most things commercial, that fickle factor called “supply and demand” is generally not far away from the driver’s seat.

Along with having, and managing, my own personal property investment interests with my husband, I’ve had a rather interesting vantage point as part of the support team for many investors, some of whom I’ve advised since I ventured into property law a few aeons ago. Watching, and being a part of property investors’ journeys, is really quite fascinating – and eye-opening.

Janice’s Lesson Number 1: If there was some magic, get-quick-rich formula, we’d all be doing it. Forget the myths and the hype – big picture, successful property investment comes down to three vitals: sound goal-setting and planning, quality due diligence and on-going prudent management. A healthy measure of patience and “stickability” doesn’t go astray, either.

Look before you leap

When someone comes into my office – before they’ve taken the leap – that’s a pretty heartening sign to me. If they proactively mention seeking accounting and financial input and guidance, too, my confidence in their ability to navigate the highs and lows of property investment gets another boost.

To succeed in playing the property investment game requires a pretty good sense of where your skill set and knowledge begins and ends, and bridging any gaps with specialist support and technical know-how from the get-go.

Janice’s Lesson Number 2: You don’t know what you don’t know – until you find out. Common mistake numero uno is assuming purchasing and running a rental property is just like buying your own home, except the tenants will cover all the mortgage … and you get to mellow in your deck chair as the profits start rolling on in.

Take my word, there is no “cookie cutter” approach; everyone looking to try their hand at property investing needs an individualised plan that specifically addresses their personal needs and aspirations, plus implements the tailored strategies, mechanisms and protections necessary to meet the end game. And, after ensuring you have a solid advisory team by your side, that is the driving fundamental that needs addressing before all else: where do you want to go with property investing?

Winding road to Mt Moolah

While the natural rejoinder is probably along the lines of “Mt Moolah”, you really do need to go far deeper in identifying your rationale and objectives to ensure property investment is, in fact, the best vehicle for you, and that you structure everything in line with your goals. Good, seasoned professionals will walk you through this, providing whatever background and reality checks you might need to make an informed decision.

Janice’s Lesson Number 3: Try to go into this process with an open mind. You might find, for example, you think you’re cut out for commercial property investment, when really you’re objectives are more suited to building a residential portfolio – or vice versa. Avoid at all costs the scenario I see way too often of committing to a particular property and then retrospectively trying to devise a plan. The numbers likely won’t stack up quite as healthily as they would have had you put the horse before the cart.

Much like you wouldn’t take a really expensive trip somewhere without working out the best route beforehand, remember: deciding where you want to go with property investing without a map is signing up for a potential wild goose chase. As well as charting out the best route to realising your objective, you’ll need to get down to the nitty gritty, too, of what return on investment you’re seeking and when. Are you looking to shore up your retirement nest egg? What’s your priority: supplementing your income now or later; maybe, you’re more interested in capital gain? What life stage are you at, and how much risk are you prepared to take on? How can you best structure funding for your property?

 

Protecting your investment

As you peel back the layers, more considerations will come to the fore. Is there enough money in the kitty to retain a property manager – or are you equipped to take on that role yourself? Bear in mind, tenancy laws can be a minefield, and whether you take on property management or outsource it, you’ll need to have a working knowledge of your obligations and rights. Insurance is another trap for young players. Your advisors can help make sure you have the right policy to properly cover you, and that you understand fully your contractual requirements.

Janice’s Lesson Number 4: No, property investment is not for the fiscally faint-hearted or those with a proclivity for instant gratification and easy gains. I’ve had many clients who started small, and have since built up a solid and enviable portfolio. They decided what they wanted, then set about putting in the forethought, learning and hard yards. Today, their bank balances and lifestyle are a direct reflection of their investing intelligence. Good things do, indeed, take time.

Residential property Developing residential property