Hang in there, Landlords

Monday 6 September 2004

The message is loud and clear for people who have bought rental properties in the last few years. Batten down the hatches! Ride out the storm!

By The Landlord

I'm not saying most rental investments will turn out to be bad. The long-term trends in property prices have always been upwards, and I haven't heard anyone predicting that will change.

In the next few years, though, many rental properties are going to look disappointing. And whenever that happens to any type of investment, the foolish bail out.

They bought high, and they end up selling low - a strategy that will never make them rich.

It happened to many investors in New Zealand shares after the 1987 Crash. And it happened a couple of years ago to investors in international shares or funds holding those shares. They couldn't cope with big falls. They lost heart.

But wait, you might be saying, house prices don't fall nearly as far as shares.

True. But there's a fundamental difference between shares and rental property. These days, very few people borrow to invest in shares; almost everyone borrows to invest in rentals.

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