Wellington Property Investors' Association

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02-11-2014

Listed Property Funds: Don't take property advice from a financial planner

The NZ Herald recently had an article on "Giving up the day job" with a financial expert sharing some steps to be taken by those who want to retire while they are still young. You can read the full article at http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11337471

His advice was to pay off the mortgage in your mid 40's, then accumulate assets which pay out an income, such as shares, bonds or a property fund. Good advice, but all these assets earn the financial advisor an income as well.

No mention was made of starting your own business, but direct property investment was mentioned. The financial advisor admitted that "there's a potential for income from rent and money to be made through a capital gain on selling the property." But he is particularly cautious at the moment because "property is overvalued, especially in Auckland". Instead he would recommend listed property funds rather than directly buying a house or apartment. Again, a recommendation that earns the financial expert an income.

This is a good example of not taking property advice from a financial planner, but it raises an interesting point about listed property funds.

While many rental property owners have built an asset base in residential rental property, this may not be the most suitable form of investment when they retire. Rather than asset growth, retiring investors are looking for higher income and less work. Listed property funds may be a good option.

ANZ Head of Research for Australasian Equities, Craig Brown wrote a good overview of listed property funds in July this year. You can read it at https://www.property.org.nz/Folder?Action=View%20File&Folder_id=484&File=CraigBrown.pdf

In another Herald article, Authorised Financial Adviser, Brent Sheather, provides some excellent advise about buying listed property and syndicated property. You can read this at http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=11242908

The Sunday Star Times warned about management fees in February. They noted that "The managers of listed property funds reaped rising profits for more than a decade while dividends to investors fell.” The full article is at http://www.stuff.co.nz/business/money/9685597/Investors-lose-out-to-fund-managers

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