KEY POINTS:
HOLD OFF
Bargain-hunters beware: if you're tempted to leap into the rental property business right now - don't.
That's the advice from Andrew King, Property Investors Federation vice-president and an experienced landlord who is cautious about the market.
His advice for would-be residential investors wanting to weather the recession is to buy books on investing, school themselves on strategies, join organisations which offer landlords professional advice, arm themselves with knowledge and hone their skills.
"Most investors should not invest at the moment because it's too risky. They're better to sit on their hands," King said.
He also advises against attending motivational rallies promoting real estate and buying properties from meeting organisers, saying a conflict of interest should act as a warning to any savvy investor.
"Don't go to seminars by people selling properties because the information will be completely biased. Get educated, don't be rushed, know the market. Hold on and see what happens because in a year's time, interest rates will be lower."
Investors hell-bent on buying should aim to buy at bargain-basement prices with an eye on how a property can be improved to generate more rent, King says.
Buyers cannot bet on rents rising fast to offset the currently high interest rates. King has noticed an influx of rental properties in the last few months, as vendors pull their properties from the market and find tenants to help pay the mortgage. That has meant rents staying relatively static. He has also noticed tenants staying put in a move he attributes to them possibly being fearful of a rapidly changing market.
This combination of factors means he is taking a wait-and-see-approach and telling others to do the same.
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Buy, buy, buy.
So says Dean Letfus, a motivational speaker claiming to have accumulated a $20 million portfolio here and in Australia in four years.
"My advice is to be accumulating property as quickly as possible because there is a major boom coming," Letfus said.
"Look for cash-flow positive bargains and long-term settlement opportunities.
"Every slump is followed by a boom.
"We don't need to panic, we just need to ensure we are comfortable holding property till the recovery hits and sell down then to create wealth."
The Aucklander said selling now without finding somewhere better to put the money would be counter productive.
"Property has not stopped being the lowest risk and highest return investment class just because we are in a downturn."
But he realises some people need to sell if they are stretched.
"If you are highly geared in this environment, then retiring debt needs to be a priority especially if you are heavily exposed to one funder.
"For most investors, the commonsense approach is to ride out this phase and wait for the recovery.
"Own enough property to be able to sell down in the next boom and retire.
"Selling now is only for those who are in bad financial shape.
"However if you are pessimistic and believe the doom and gloom merchants then sell down now as things are going to get worse before they get better.
"I have many peers who are recommending this.
"Only time will tell.
"Most long term investors I know are lowish geared so the current situation doesn't concern them at all or they have sold down 18 months ago and are entering the market now with vulture funds."
