How Risky is Too Risky When Considering a Property Investment?
- Ryan Smith
- Oct 17, 2022
- 4 min read
Updated: Aug 5
Any investment carries risk, but there are strategies property investors use to reduce their risk exposure.
Risk is a part of life.
Whether you're driving to work, crossing the street, or launching a new business venture, risk is baked into everything we do.
Some of it you can control, and some of it you can’t.
The same is true when considering property investment risk. While you can’t influence the housing market or the global economy, you can control how you respond to those factors and, crucially, how much risk you’re willing, or able, to take on.
The question investors should be asking isn't just: “Is this a good investment?”
It’s: “Is this a good investment for me, given my time horizon and risk appetite?”
What Is Investment Risk in Property?
Investment risk refers to the possibility of outcomes not going as planned, whether that’s slower-than-expected capital growth, rising interest rates, or vacancy issues.
In property, some risks come from the market itself (like house price fluctuations), while others are personal (like over-leverage or poor cash flow planning).
But here’s the key: Time mitigates risk. The longer your investment horizon, the more wiggle room you have to absorb short-term shocks and wait for markets to recover.
Time Horizon: The Single Biggest Factor in Managing Risk
When people talk about "safe" or "risky" investments, they're usually forgetting one crucial thing: the timeframe.
If you’re 60 and want to retire in five years, your risk appetite should be very different from that of a 30-year-old with three decades ahead of them.
Your time horizon determines your ability to ride out market cycles, which in turn dictates the appropriate level of risk, scale, and leverage you can afford.
Let’s compare two investors:
Investor A: Age 60, Retirement in 5 Years
Strategy: Minimise risk, preserve capital, generate reliable income
Likely approach: Purchase one quality property, use a sizeable deposit, and prioritise paying off the mortgage
Might use KiwiSaver to clear the remaining debt before retirement, aiming to produce a mortgage-free, income-generating asset
Loan structure: Principal & Interest (P&I) repayments to aggressively reduce debt
Why? Because this investor is looking for certainty. There’s no appetite for speculation; they simply don’t have the time to recover from a downturn.
Investor B: Age 30, Retirement in 35 Years
Strategy: Maximise long-term growth, use leverage to scale
Likely approach: Build a multi-property portfolio using existing equity and 100% leverage
Focus on properties that are cash-flow neutral or slightly positive
Loan structure: Interest-only loans to free up cash flow and allow for more purchases
Why? Because with multiple market cycles ahead of them, this investor can afford to ride the waves.
They can take on more speculative investments, such as development potential properties or high-growth suburbs, because time is on their side.
Risk Tolerance vs. Risk Capacity: Know the Difference
Just because you feel like a risk-taker doesn’t mean you should take on risk.
Risk tolerance is your emotional ability to handle ups and downs
Risk capacity is your financial ability to absorb losses without derailing your goals
Many investors confuse the two. A young couple with two kids and one income may emotionally feel ready to go “all-in,” but their finances may suggest otherwise.
Conversely, a risk-averse retiree might actually have the cash reserves to take a calculated risk and diversify into property.
Understanding both is essential.
How to Assess Your Investment Risk Level
Here’s a practical approach to assessing how much risk you can take:
Define your investment goals – Are you chasing growth, cash flow, or security?
Determine your time horizon – When do you need access to the returns from your investment?
Review your financials – What’s your borrowing power? How much surplus income do you have? What’s your current debt load?
Understand your personal risk tolerance – How would you feel if the market dipped 10% tomorrow?
Work with a professional – A property investment advisor or mortgage broker can model different strategies based on your current and future position
Final Thoughts: Don’t Gamble; Strategise
Property investment isn’t about bravado or blind optimism. It’s about playing the long game in a way that aligns with your personal timeline and financial situation.
The best investors aren’t the ones taking the most risk; they’re the ones taking the right risk for their circumstances.
So, before you dive into your next property deal, ask yourself: Do I know how much risk I can truly afford to take?
Because in property, as in life, it’s not about avoiding risk. It’s about understanding it, managing it, and letting time do the heavy lifting.
How Can We Help You?
We help Kiwis build wealth through property investment. Our advisors will take the time to understand your individual needs and recommend suitable investment properties to help you build wealth and set up your retirement.
What Does This Look Like?
We use a 3-step process:
We start with a Discovery Meeting where we learn about you, your goals, etc., and you learn more about us.
This is followed by a Strategy Meeting where we model your retirement plan, understand key investment concepts, and briefly touch on some investment choices.
Finally, an Asset Selection Meeting where we discuss investment options in more detail and make any recommended adjustments based on what we now know about you.
Who Are We Right For?
We help people make smart investment choices and set up their futures. From first-time investors to experienced investors, we can cater to a wide range of people and help set up their futures through research-based property investment.
How Much Does It Cost?
Our advice is free to you! If you choose to invest, we’re paid by the property developer. This developer-paid model allows us to provide no-obligation property investment advice in New Zealand, without charging clients directly.
What Do We Do, And What Don't We Do?
What We Do
We offer end-to-end New Zealand property investment advice, helping Kiwi investors grow wealth through smart, data-led decisions. Our focus is on quality new builds in strong locations, tailored to your goals, guided by a team that knows the NZ market inside out.What We Don’t Do
We don’t do KiwiSaver, shares, cryptocurrency, or broad financial planning. Thrive is not a generalist firm. We specialise in property investment in New Zealand because that’s where we deliver the most value. By staying focused, we cut through the noise and help our clients make confident, well-informed property investment decisions.
How Do I Start?
Start the process now by booking a time to talk with our advisor by clicking here.
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