I have been in the real estate business and market for over 10 years and I have persevered on my own learning (and making mistakes) as I go. The risks and demands of real estate as a business is not for the faint-hearted and it is not for everyone but I have learnt the fundamentals and taken action. Be reassured that there is help and there are resources and professionals (they have walked the talk) who can help guide and mentor you if you are open and willing to set goals, be hungry for knowledge and be an active entrepreneur in an ever changing climate.
One: Location, Location, Location
Sir Bob Jones, the eighty year old Kiwi and billionaire property tycoon always had “three universal and inalienable golden rules” for any property investors. Its location, location and location. Its hard to resist Otago-one of the most beautiful and stunning regions of New Zealand. I knew after making the big decision to move away from Wellington to Dunedin for medical studies, I had to be creative in finding ways to supplement my income as a student. The Otago region provided some of the hot real estate spots to invest as an investor as a way to diversify my portfolio and spread the risks. My first contract on a house (3 bedrooms) in Oamaru in 2020 fell through due to my inability to service my mortgage from not earning a regular income. My second contract on an apartment (a one bedroom unit) in Dunedin in 2021 for half a million dollars was rejected after failed negotiations. My third contract in the Waitaki region in Otago was a great success for a business deal!
Two: Better Returns Compared to the Stock Market
I knew the global real estate market has been hot with low interest rates and a reverse net migration increasing the demands for a place to live. In a global pandemic of covid-19, the stock markets have been so volatile due to numerous factors beyond our control. But it is safe to say that with real estate investments historically, my risk of loss is minimised by the length of time I hold onto my property. The truth is when the market improves, so does the value of the home and as a result, it builds equity which you can use as a leverage to purchase and build your empire. Having a real estate gives you more control of your investment because it is a tangible asset creating leverage for you to capitalise on numerous revenue streams while enjoying capital appreciation.
Three: A High Tangible Asset Value
Tangible property by law means anything which can be touched and includes both real property and personal (or moveable) property by law according to Google. With real estate being a tangible property means you can add value either by renovating, creating an extra room, do cosmetic repairs (such as Refresh, Repair and Rejuvenate) to bring up the face value in a short time. You couldn’t do that with the Stock Market which can dip below zero. The lessons I have learnt with real estate being a tangible asset was the renovation strategy to use when only making improvements that will add to the resale of your property. There will always be value in your land and value in your home. Home owners insurance is the best policy to protect the asset in the worst-case scenario.
Four: Real Estate Values Increasing Over Time
Let’s face the real facts-history continues to prove that the longer you hold your real estate, the more money you will make. The housing market is cyclical. It will recover from a crash, boom and probably plateau. In this current climate of COVID 19 where people look to countries who have managed this deadly virus better and the politics is centred on saving lives first rather than money, the demand for migration and relocation is unbelievably high. New Zealand is a prime example. Its management of the pandemic has been extraordinary and it leads the world in how to handle crisis. Its real estate market has become so “hot” that despite the uncertain times, vendors have made positive appreciations. The real estate flipping has also been timely positive with huge gains in the space of less than year in New Zealand.
Five: Real Estate Diversification
During my early years of being in real estate investment, I invested in a financial planner. The best advice I’ve had to present is “to always diversify your investments, do not have all the eggs in one basket.” In a real estate portfolio, the usefulness of having three types of spreading the risk itself is valuable. You can choose to invest in Commercial, Residential or do Land Banking investments. Within these investment portfolios, there are multiple sub categories which you can use to spread and mitigate risks. I have chosen to stay in residential and land investments. I believe real estate will always be a safe haven and tangible asset to mitigate risk in your portfolio. In a post Covid world and the NZ real estate market, many have amassed wealth by solely investing in real estate.
Bonus: The Numerous Tax Benefits
Being a student has its advantages and disadvantages. The best thing about it is the excitement of learning new theories and research. The lowest point of it is, as a mature student coming into University again with no family and financial support, it’s a tough journey. It’s a challenge you need to think twice about before embarking on this useful chapter. Real estate has helped me reaped some of the huge benefits of tax despite its own stressors. It has provided me with the benefits of an extra supplemental income to manage a student lifestyle. There are tax deductions on mortgage interests, operating expenses, property taxes, insurance and depreciations which are easily claimed by the accountant on your behalf.
On reflection, the last 10 years of being in real estate has proven to be an insight of deep learning. I reluctantly bought my first property, a plot of land in 2008 which was all due to my fathers vision. It took me 10 years to pay it all of-one million Vanuatu Vatu! There were times I had questioned whether real estate provided any value as the stress and the thought of having millions of dollars stuck against my name in debt was unsettling. The twenty first century has presented its challenges. But real estate has proven it is a safe investment if you are smart with that calculated risk. The biggest lesson has been that real estate can provide years of fun, happiness and priceless memories that will last a lifetime.