Join Date: Mar 2007
Location: Johannesburg, South Africa
Re: property investment
No, but I do finance property, mainly commercial concerns and up to some pretty large anmounts.
Firstly, the question of why you want to invest - is this going to be a major part of your income or is it more of a supplement to your pension/long term self-funding capital investment? If the former, you aren't likely to do well as a first timer... get involved as an equity partner with someone who has weathered a couple of storms in the property market already and break away after you've served your apprenticeship.
If the latter, make sure you're going to be tenanted. Research the area you want to invest in; talk to local estate agents about rental demand in the area and the ability to resell a property quickly to retire the debt in need. What sort of deposit are banks going to be looking for if you're purchasing on a buy to rent basis? Investigate the legalities (can't speak for your neck of the woods, but ours are pretty onerous) - what sort of damage deposit can you take? What rights do you have as a landlord? How fast can you evict someone if they fall into arrears? Is capital gains tax an issue in NZ and does it make the resale of a property prohibitive?
Property management companies: a good enough idea, but expensive. If you're going to use one, use the one with the best reputation.
Cash negative? The very idea is abhorrent unless it's money you really aren't going to miss - if the amount you need to make up is the difference between three meals a day and starvation (even for a relatively short period)..... run.
Property should be a great investment all right, but it can be a millstone round your neck if you're overindebted and the market turns against you - interest rates rise, the resale market falls, and while the rental market usually picks up around then, you tend to be faced with an increasing monthly shortfall (since rental isn't keeping pace with increases in bond repayments) that you have to subsidise at a period where it's difficult to convert to cash.
Like everything else, moderation is the keyword. Project a worst-case scenario and budget your spending around that.