More needs to be done to educate Kiwis about alternative investment options if the country is to succeed in shifting the focus of middle New Zealand from onerous debt-burdened residential property investment as the only path to financial security.
Director of wholesale Commercial Property Investment firm Mates Invest, Ryan Impson, says that while politicians may promise to wind back property taxes and reinstate the ability to offset interest paid on home loans against rental income, governments come and go.
Economic reality makes it unlikely that mum-and-dad investors will ever see something like the golden age we have just experienced as we transition from a capital gain economy to an income-focused one.
“It has always made economic sense to diversify your investments, but most Kiwis put all their eggs in the residential property market because the dialogue is all one way, and they don’t know or understand what alternatives are available. As a society, it’s all that’s in the news and the punching bag of politicians, so it’s no wonder we have become so divisive about residential property investment.
“We need more investment opportunities, better access, more education and, in particular, more New Zealand-owned banks because right now our gross domestic product is being lost to bank profits which are controlled by overseas entities.”
Impson says Mates Invest was established to offer wholesale Kiwis more opportunities to diversify into commercial property investment without the burden of debt, and he wants to see more entities here that offer middle New Zealand other options to prepare for retirement.
“Mates Invest has tailored a solution to help facilitate the transition to more advanced investment options, generally accessible to the wealthiest in society. Now is not a time of doom and gloom for Middle New Zealand, as some would have you believe. It is a market ripe for pivoting to better-returning investments .“
Impson says commercial property investment has not been as popular as residential property investment because it is less accessible to Kiwis, who often rely on borrowed funds to achieve a return on investment.
“At the moment, houses are a Kiwi’s biggest asset, but our values are artificially inflated to fund our consumptive behaviours, and price appreciation doesn’t pay bills without further borrowing or downsizing,” says Impson.
He offers the following advice to mum-and-dad investors:
1. Consider debt-free investment
Residential property investment generally uses debt. Freeing yourself of the second or third mortgage opens new, potentially more profitable, less stressful opportunities.
“You also contribute to keeping returns in the New Zealand economy instead of enriching overseas financial institutions.”
2. Research your options
There are alternatives to residential property investment if you do your research.
“For example, while most people are familiar with investing in residential real estate, commercial property can offer more attractive, stable returns.”
3. Invest according to temperament
Managing debt—such as a mortgage on a rental property—requires a temperament that is comfortable with being uncomfortable. An alternative is a 100% capital investment option that can buffer you from cash flow uncertainty.
“Cashflow from a residential property can be highly volatile because you are relying on individuals, who have jobs and debts and social issues, to pay their rent on time, and some do not. There are alternatives to being a landlord. Do your research. Think bigger.”
For more information see: https://matesinvest.co.nz/
