How property investing works

You have a number of decisions to make when investing. We discuss them all with you. But we believe property investment can be a strong vehicle to grow your wealth. Not sure how? We think Tony Alexander, Chief Economist at the Bank of New Zealand sums it up in his weekly edition of ‘BNZ Weekly Overview.’

 

‘A few weeks back I wrote an article comparing potential returns from keeping a property I have in Auckland or selling it and depositing the money and I thought Overview readers might find some interest in it. So here goes the same subject. One of my properties is a little studio in Auckland. At a stretch it might sell for just under $300,000. Let’s assume it did. I could bank a capital gain and feel clever. But what would I then do with the money as a conservative investor? If I put the $300k in the bank I could get 3.5% which after tax would deliver $7,000 in the hand each year. After ten years I would have saved up $70,000 plus some compounded interest. If I keep the apartment I also will get about $7k in the hand after expenses and tax adding up to $70,000 plus some compounded interest. Am I indifferent between the two options? No. After ten years my $300,000 term deposit will still be $300,000 plus the accumulated interest. My little apartment however is really, really unlikely to still be priced at $300,000 a decade from now. I would expect it to rise at a pace of at least 2% per annum. Therefore, attractive as the thought of getting $300k in the hand is at the moment, if the alternative is placing the capital on term deposit and watching inflation eat my capital away I opt to keep the property and rent it out.’

 

At Pattersons we see what will work best for you depending on your goals, when you will need access to your funds and what your realistic capabilities are. If that’s property then great! If a portfolio is more suitable then that’s great too! We will assist you in finding the right option to align with your wanted outcome.

 

To find out what works for you, contact us for a free one hour wealth check up.

 

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