There’s a bit of negativity in the media about property investors but most of them are normal people like you and I. New data analysed by the NZ Herald has just proved that point, showing that a third of all property in New Zealand is owned by mum and dad investors who only own a small number of properties.
When you imagine a Kiwi property investor, your mind might conjure up an image of wealth and excess. The investor in your head might live in a mansion in Remuera and drive around in a supercar.
The data mentioned above shows us that investors aren’t all filthy rich – most of them are just everyday Kiwis. In many cases, these mum and dad investors were simply lucky enough to buy a home in New Zealand several years ago when they were more affordable.
Since then this group has enjoyed a decent helping of capital gains and dutifully paid off their mortgages, which left them with a big chunk of equity.
The vast majority of our investment clients are small-scale, mum and dad type investors. Nine times out of 10 they don’t buy their investments with cash – instead, they use equity from the property they already own as leverage.
That means they’ve bought with 100% finance, extending their mortgage on their existing property to release cash to use as a deposit for a new one. The ability to leverage property to buy more property is what makes it such a powerful investment, and it’s why these mum and dad investors have been so successful.
What’s awesome about this is that thousands of everyday people around New Zealand are sitting on enough equity to buy an investment property right away. Are you?
If you’ve been living in your home for more than five years, if you’ve renovated or improved it, or if you own property in an area that’s seen rapid value growth, you could be sitting on a big chunk of equity. As a rule of thumb, anything over 20% equity (in your home) can be used as leverage to buy more property, and if you’re mortgage-free (100% equity) you could have the funds to buy several.
Before you mortgage your home to the hilt, you need to set goals and make a plan to reach them. Do you want to retire with a big chunk of cash? Are you after cash flow positive property to supplement your income or help fund other investments? Whatever your goal is, your plan should include a detailed description of how you’re going to make it happen down to the most minute details.
The team at Money Empire can help you with everything, from setting goals and creating a financial plan, to securing and structuring mortgages and helping with property selection. Plus, one of the best things about our service is that it’s almost always completely free – meaning you can get take the first step towards becoming a property investor without spending a dollar. Get in touch today and let’s get you started.