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Will COVID-19 change the way we invest in properties?

Thursday, April 16, 2020

IMG SOURCE: UPSLASH

 

As real estate investors, our operations have come to a standstill. But how long will it take for us to start moving again, and how long will it take us to get back on our feet?


The short answer; who knows?

The longer answer is that we can assume that the residential property investment market will definitely change. These times are unprecedented - that is a fact. As has been covered in previous blogs, the COVID-19 pandemic affects everyone - landlords, renters, property investors, the lot. However, property is a long-term investment, not a passing consumer trend. Although it may reshape, we have confidence in it succeeding in the post-COVID 19 landscape.


Achieving your long-term vision

When you first get going, you give yourself a long-term goal and milestones to achieve over a certain period of time. Given the circumstances, not achieving your goal within your timeline does not equate to failure. It does, however, require some level of goal readjustment. You will need to readjust your plans in two key areas: rent returns and capital growth.

Making a return on rent

This sounds glaringly obvious, but your key stakeholders here are the ones who are paying the rent in the first place. However, those with investment properties will feel the stress of not knowing how long their properties can be supported if renters struggle to pay. Therefore, speaking with your mortgage lender is also crucial. Reach out to those who are giving you the return (your renters), understand the legalities behind rent arrears and/or rent holidays, and create a plan so you can mutually support one another in this time.

Growing your capital

While there is no definite timeline for when this will all “blow over”, try and assess what the property market might be like ‘afterwards.’ It feels strange to suggest ‘afterwards’ because realistically we don’t know what ‘after’ is.

For investing in rental property, you need to consider the target market of renters in the wake of lockdown easing. Assess potential demographic shifts. In areas where there are universities or prominent industries, investigate the rental market in that area.

Although median house prices have increased, we know that the cash rate will remain at 0.25% for the foreseeable. Additionally, quantitative easing (QE) will make retaining and gradually building your capital easier (pardon the pun) in the short run. If you were planning on investing in a new property or ready to finalise deals before the crisis took scale, this will still be possible and possibly at lower interest rates. The challenge will be maintaining the short-term boom of continued property investment and ensuring it gathers return afterwards.


Remember…

We are in this for the duration, not necessarily the ‘long run’. We don’t know for sure how ‘long’ the run is! The tough decisions you make now will likely pay off in the end, even if your short-term cash flow reduces as a result. History has shown that the New Zealand property market has remained strong throughout previous financial or environmental crises. As the real estate market was on a consistent upward climb for the past few years, it can be assumed that there are enough collective reserves to maintain its success.


 

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Mathieu Holt- Managing Director, The Tenancy Practice Service & TPS Credit Control
Through the Association I found the channels and methods to fund the purchase of property I never dreamed about. Grant Brown

All round it has been one of those things Neil and I felt was really worthwhile belonging to. We have learned so much it has just built our confidence in what we are doing.

Janice Bieleski
I read two articles in the monthly magazine that saved me over $5,000. That is my membership fee for the next 26 years and I am sure I will learn a whole lot more! John Duncan
Fantastic organisation. The networking opportunities are brilliant and provide us with information and opportunities that cannot be obtained anywhere else. We learn something new at every meeting and we've been in this game for nearly 20 years. Pauline and Gyanen Kumar

I find the information obtained from various APIA meetings very useful in guiding my own property investment and rental management.  I also enjoy the networking opportunities with like-minded investors.  I am inspired by other investors’ success and find the more experiences and knowledge that I share with others, the more confident I become.  

Thanks to all APIA event organizers and administrators for your brilliant work. 

Stella Shao

I like talking to people and learning from their experience because it gives me the confidence to invest well. I think it is a knowledge thing. I now know I am doing things the right way.

Stephen Weatherall

My APIA membership has become a total success.

Every time I attend a monthly or regional meeting I come away with so many useful and positive tips that have added value to my property investments and management.

Not only that, the website is a great place for practical advice and useful information. It has now evolved into an important resource for my business.

Talk about value for money! The discounts I have been getting at Bunnings when I present my APIA membership card have more than paid for my annual subscription!

Tim Duffett, Plan A Investments Limited