Buying an investment property can feel out of reach, especially if you're unsure where to start or whether you have enough money behind you. In this episode, Mike Vincent, Jess Hargreaves and Ilse Wolfe unpack the six biggest mistakes stopping people from purchasing their first investment property.
Mistake #1: Assuming You Can't Afford an Investment Property
One of the biggest barriers for aspiring investors is simply not knowing what they can actually afford.
Many people rely on online lending calculators, only to discover that the reality looks quite different when they speak to a lender. Investment property lending can be more complex than owner-occupied lending, particularly when rental income, future renovations, or value-add opportunities are involved.
The team explained that the first step is understanding your affordability, equity position, and borrowing capacity. Having the right advice can help investors understand what is realistically possible rather than ruling themselves out too early.
Mistake #2: Thinking You Need More Equity Than You Actually Do
Many people assume they need a huge amount of equity before they can buy an investment property.
However, the episode highlighted that this isn’t always the case. Investors often underestimate what can be achieved with the equity they already have, particularly when looking outside major centres or considering value-add opportunities.
Ilse shared examples of investors getting started with far less usable equity than they initially thought was required. The key message was not to count yourself out before having the numbers reviewed properly.
The team also discussed how some investors delay buying because they believe they must fully pay off their family home first. While reducing debt is important, waiting too long can mean missing valuable time in the market.
Mistake #3: Ignoring Your Financial Foundations
Before taking on the risk of an investment property, it’s important to ensure your financial foundations are in place.
Jess explained that many people are eager to invest but haven’t established an emergency fund or sufficient cash reserves. Without that buffer, investors can be forced into making poor decisions when unexpected events occur.
Having access to cash, whether through savings or appropriate lending structures, can provide flexibility when life throws up challenges such as job loss, market downturns, or unexpected expenses.
The team stressed that financial decisions are often at their worst when made under pressure, making preparation essential before taking the next step.
Mistake #4: Investing at the Wrong Stage of Life
Property investing isn’t just about numbers. It’s also about timing within your own life.
The discussion highlighted that investors need to consider whether they have enough time, capital, and knowledge to make an investment strategy work. For some people approaching retirement, taking large risks with limited time to recover can create additional challenges.
However, the episode also explored how families can work together. Examples were shared of parents and adult children combining their respective strengths, with one providing capital and the other bringing knowledge and execution.
The important point was that there is no one-size-fits-all approach. Investors need to assess whether their current stage of life aligns with their goals and risk tolerance.
Mistake #5: Having the Wrong Expectations
Expectations can make or break an investment decision.
The team discussed how investors often focus on immediate results and expect properties to deliver significant cash flow from day one. In reality, property investing is typically a long-term strategy.
Ilse explained that while many properties can become positively geared, investors often need patience to allow the benefits to compound over time.
The conversation also highlighted the danger of anchoring expectations to things like asking prices, council valuations, or advice from friends. Investors who enter the process with unrealistic expectations can find themselves disappointed, even when the property is performing exactly as intended.
Mistake #6: Looking in the Wrong Location
Many first-time investors naturally focus on familiar areas close to home.
However, the team discussed how some of the strongest opportunities can exist outside the major centres. Regional locations, satellite towns, and areas benefiting from population growth may offer stronger cash flow opportunities and lower barriers to entry.
Ilse highlighted growing interest in regions such as Palmerston North, the wider Manawatū, Wellington, Christchurch, Ashburton, and Oamaru, while emphasising the importance of understanding local market dynamics.
Rather than focusing solely on convenience or familiarity, investors should consider which location best supports their desired outcome.
Key Takeaways
- Don’t assume you can’t afford an investment property without getting professional advice.
- Many investors have enough usable equity to get started sooner than they think.
- Strong financial foundations, including emergency savings, are essential before investing.
- Your age, stage of life, and available time should influence your investment decisions.
- Unrealistic expectations can prevent investors from making good long-term decisions.
- Property investing is often about time in the market rather than timing the market.
- Regional markets may offer opportunities that are overlooked by city-based investors.
- Having a clear objective helps determine the right property and investment strategy.
Next Steps
Thinking about your first investment property? The Lighthouse Financial team can help you understand your borrowing power, structure your finances, and create a plan to build long-term wealth with confidence.
Learn more about Wolfe Property here.
If you’d like to watch 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.
