Starting your journey in property investing can feel overwhelming - especially with thousands of listings and countless strategies to choose from. In this episode, Lighthouse Financial’s Property Director, Adam Farrell, shares the five essential steps every beginner should follow to build a strong foundation in property investment.
Step 1: Start with Strategy
Property investment is all about financial results – not emotions. Many first-time investors approach buying an investment property the same way they bought their own home: by focusing on features they personally like. Adam stresses that you need to start with your “why” – whether your goal is capital gains, cash flow, or value-add projects like renovations or development.
Your strategy should guide every decision you make. This means understanding the outcomes you want, being realistic about your resources, and focusing on the numbers rather than how close the property is to your current home.
Step 2: Understand Your Affordability
Before you start searching, you need to know what you can afford. Adam recommends speaking to a mortgage broker early to get a clear picture of your borrowing capacity and purchasing power.
Trying to guess your affordability with “rules of thumb” can be misleading. Instead, work with a professional who can factor in your income, debt, and the bank’s lending criteria to give you accurate numbers. This helps you avoid wasted time, unrealistic expectations, and overwhelm.
Step 3: Choose the Right Investment Property
For everyday investors, the first big choice is new build vs existing. New builds are low-maintenance, come with warranties, and are generally easier to manage – but they usually have a higher purchase price and lower yields. Existing properties offer more variety and potential for higher yields, but can come with maintenance issues, complex body corporate arrangements, and less predictable growth.
Adam also cautions against assuming that smaller apartments are the “easier” option. They often have lower growth potential and higher ongoing costs, such as body corporate fees and insurance.
Step 4: Know Your Numbers
A sustainable investment comes down to the balance between yield, cash flow, and growth. Adam aims for properties that achieve around a 5% gross yield, which can make cash flow more manageable compared to the Auckland average of around 3%.
When projecting future affordability, it’s wise to run numbers at an interest rate of around 7.5–8%. This gives you a safety buffer if rates rise. Also, consider the impact of choosing interest-only versus principal-and-interest repayments, based on your broader financial goals.
Step 5: Get the Right Advice
Buying your first investment property is a team effort. Alongside your mortgage broker, you’ll need a property-specialist lawyer who understands contracts, due diligence, and (if relevant) off-the-plan purchases. An accountant can also help you choose the best ownership structure, from buying in your personal name to using a trust or look-through company for asset protection.
Professional guidance ensures you avoid costly mistakes and can make decisions with confidence.
Key Takeaways:
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Define your strategy before you start looking.
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Focus on numbers, not emotions or proximity.
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Get clear on your affordability through a mortgage broker.
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Weigh the pros and cons of new builds vs existing properties.
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Aim for strong yields and stress-test at higher interest rates.
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Build a trusted team of professionals to support your purchase.
Next Steps:
Ready to start your property investment journey? Book a chat with Lighthouse property to match the right property to your strategy – no guesswork, just a clear path forward.
If you’d like to learn more, check out these other episodes below.
For a no obligation discussion to see how we can help you on the path to wealth, please contact us.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
