Top 7 tips for buying an investment property

Kiwis have a love affair with property and it continues to be one of New Zealand’s favourite ways to increase wealth.

Whether you are considering becoming a first-time investment property owner or want to build on your existing portfolio, searching for the right investment property can be a lengthy process.  

Not only do you need to think about your long-term wealth goals, but you need to make sure the investment property you buy will help you achieve the goals you set for yourself.

Read on for seven tips to consider when looking for an investment property.

Understand the market that you are buying in

There are several property markets across New Zealand, each performing a little differently based on a number of factors. Once you have a few markets in mind, do your research to understand how these markets have performed in recent years.

You’ll want to know about rental availability rates, vacancy rates, demographics and the types of rental properties available.

Location location location

Once you’ve narrowed down the markets that you’re interested in, the next step is to identify some specific locations of interest.

Entering a good market is great but securing a property in a top location within a great market is even better. Find out if there is a steady supply of tenants so that when one leaves it doesn’t take long to find a replacement. Make sure you weigh up the proximity of properties to schools and public transport and consider if you are purchasing for capital gain or yield.  

Capital gain or yield??

If purchasing for capital gain you may want to consider the main Cities such as Auckland, Hamilton, Tauranga, Wellington and Christchurch.

Not only does capital gain play a large part in helping you build further wealth through property investment but buying a property with good capital growth can help you down the track when you sell or use the equity in your current property to expand your portfolio.

if yield is what you are looking for the provincial towns may be the place to look.

Calculate the cost

Before deciding whether to purchase a property you are interested in work out the different expenses you’ll have throughout the time you hold the property.

These expenses may include property management fees, maintenance costs and general expenses such as rates an insurance. Make sure you balance these costs with what you expect to return through capital growth and your rental yield.

Understanding what the rental yield is

Understanding the rental yield of properties is a critical part of your research.

To calculate the gross rental yield of a property add the income you expect from the property, divide it by the sale price and then multiply it by 100.

If you’d like to get more details, Renthub can recommend industry professionals who can give you guidance.

Is the property compliant?

As a landlord, it is important to be up-to-date and knowledgeable on all regulations and bylaws around rental properties.

From 1 July 2021, Healthy Homes Standards will become law.

Check with the current owner if the property is ‘Healthy Homes compliant’ before signing on the dotted line and if it’s not find out what the costs would be for it to comply.

Providing a warm, dry and well-maintained rental property not only keeps you on the right side of rental regulations, it also helps to create happy, dependable tenants who will stay with you longer. 

To read more about Healthy Homes Standards click here

Self management

When deciding whether or not to self manage your property consider the following:

• Expertise: Are you fully conversant with the upcoming rules and regulations around Healthy Homes Standards

• Time: Do you have the time to manage the property

• Stress: Are you confident that you can deal with any tenant conflict

• Soft hearted: Are you a sucker for a good story?  Sometimes tenants like to pull at your heartstrings so you have to know when to stick to your guns.  Owning a property is a business and sometimes making a business decision can be tough.

 Self-management may save you money, but property management will save you time and effort so it’s important to take this into consideration before purchasing.

Looking for flexible options for managing your property?

Renthub offers a number of different options when it comes to looking after your investment property.

Whether you choose to be a self-managing landlord who wants assistance to find a tenant or prefer to have your property fully managed we tailor our services to suit your needs.  Click here to find out more

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