The allure of property investment is quite multifaceted. To some it is the touchy, feely factor. They can buy a property, drive past it and touch it, which is something they can't do with shares and bonds.

Others have had bad experiences with shares (think the 1987 sharemarket crash, investors who got burnt haven't forgotten) and other savings schemes and are looking for alternative forms of investment.

On the financial side, residential property investment has the potential to provide good returns, there are tax advantages in the form of a lack of capital gains tax, plus investors can use debt to gear up their equity and boost their returns (the opposite can also happen in this situation, too).

One of the facets that makes property attractive to investors is that it can be hands on, they can do their own research and develop their own strategies. And there are all sorts of strategies they can develop, such as buying properties solely for capital gains, or have positive cashflow properties (ones that generate good income streams) or a portfolio of properties in different sectors and regions. You can invest in new or old homes, apartments, flats, student accommodation, million-dollar properties or holiday houses, or you could become a slum landlord.

What is clear when you talk to different property investors, or read books such as Graeme Fowler's Real Estate Investors Secrets, which profiles 10 people who became millionaires from residential property, is that not only do they have their own strategies, but they stick to them. Plus, rather than having an emotional view of their investments, they focus on the numbers and practicalities of how the investment stacks up.

Over the past couple of years many New Zealanders have made a lot of money out of property investment, because house prices have risen significantly. This is borne out in the most recent Real Estate Institute of New Zealand (REINZ) figures. They show that the residential property market last year exceeded expectations with the national median sales price for December at a record $260,000.
Contrary to many commentators' predictions, the market continues to show strength with an increase in the national median sales price of 13.53 per cent over the 12 months from $229,000 in December 2003 to $260,000 in December 2004, says REINZ president Howard Morley.

Since December 2001, the median sales price for residential property has increased $82,000, or 46 per cent, making residential real estate one of the better-performing New Zealand investments over that period.

Investing in property isn't all rosy, however. Many people enter into it thinking they can be millionaires by Christmas, but soon realise they are not cut out for the rigours of being landlords, dealing with tenants and looking after their investments. While people look at property as being an investment, the government's review of the Residential Tenancies Act, the rulebook for investors, makes it clear landlords are actually providing a service and are obliged to fulfil many obligations.

Another factor that can be lost on people contemplating property investment is that if they own only one or two properties they are exposing themselves to significant risk if things go wrong, such as having a house vacant for a month.

New Zealand Property Investors Federation vice-president Martin Evans advises new investors not to buy properties too quickly. "People borrow at 100 per cent and get too highly geared and therefore have too much risk.'' He says it's also good to diversify your portfolio by owning different types of properties. Take advice and learn as much as you can, he says. "Deal with professionals who know about investment property, not just property.''