The essential quality every property investor must have

One of the reasons that I write about the New Zealand property market with such passion — and hopefully a measure of credibility — is that I’ve been part of it for a long time. I’ve been commentating on the market for around 20 years and investing in it for almost 35, and over that time I’ve developed a pretty good sense of what makes people successful at investing.

There is one quality which is more important than any other. It is so important that those who don’t have it are almost certain to fail. In order to explain what it is, let me give you a snapshot of my own journey.

I started investing in the mid80s, at a time when mortgage interest rates were around 22 per cent. That meant I had to shell out more than a fifth of the

“Property is a long-term game where gains are made over years and decades, and those who want to master it need to be prepared to wait.”

total value of a property — every year. Yet, despite this, I managed to build up an impressive portfolio, quite quickly, with very little money.

My first investment was a block of flats in my hometown of Napier. The property was in Hastings St, just outside the Napier CBD, and cost me $95,000. I was able to buy it without a deposit because the vendor was prepared to “leave in” 10 per cent of the purchase price to be repaid at a later date, effectively covering the bank’s deposit requirements in those days.

The building contained four flats, each paying $150 rent per week, so the optimum income was over $31,000 per year which meant that the property covered its outgoings and didn’t cost me anything to own.

My second property was a bungalow in the Hawke’s Bay seaside community of Haumoana for which I paid $35,000 and on which the weekly rent was $175, so again, the costs were covered.

My third and fourth properties were two houses on the same street as my flats. There was also a very large workshop which had housed a panelbeater on the same site and there was talk that a local gang was going to buy the property to establish a headquarters.

For obvious reasons the local landlords banded together to ensure that didn’t happen — but none of them wanted to be seen as the buyer so they gifted the deposit to myself and another gentleman, effectively giving us these properties at no cost.

So far so good, but it’s what I did next that demonstrates the key quality that successful investors need.

In early 1990 I found that managing the relationship with my business partner in the two houses in Hastings St was simply too difficult and signed it all over to him, walking away from any interest in the properties. Later that year, and for no particular reason, I decided that I’d had enough of property investment and having to deal with tenants and I sold the remainder of my portfolio. The global share market had crashed three years earlier so house prices were flat and I made no money on any of the sales.

It’s important to note that I didn’t need to sell. The properties were all self-funding and all I needed to do was wait for the market to eventually recover. And what would have happened if I’d waited? Who knows, but 30 years on the Hastings St flats are worth almost $600,000, the Haumoana bungalow is worth almost $500,000, and the Napier branch of Briscoes now sits on the site of the two houses I was given, so your guess on the value of that land is as good as mine.

So what is the number one quality of a successful property investor?

Patience.

Property is a long-term game where gains are made over years and decades, and those who want to master it need to be prepared to wait.

If you’re looking for a way to get-rich-quick, property investment isn’t for you.