Regardless of market conditions, property continues to be a popular investment option for Kiwis. And there are several great reasons why people choose this investment: a passive income stream to boost their pay, to fund their retirement, or to have something to leave for their kids.
Whatever the reason for purchasing an investment property, there are some key things to keep in mind to ensure your investment gets you the returns you’re aiming for.
Here are our top 8 tips for buying an investment property.
Before you even begin your hunt for an investment property, you’ll need to know your numbers – namely how much you can borrow, and the return you’ll need for the property to be profitable.
This will depend on:
Buying new comes with a bevvy of benefits for a property investor. Things like a lower deposit requirement, interest deducibility, healthy home compliance, and low to no repairs or maintenance.
An added (and often underrated) benefit of buying new is also the delayed settlement which gives you more time to save for the deposit and build up your financial position to ensure you’re able to hold the investment for the long term.
When it comes to the affordability of your investment property, you want to sit in something akin to the ‘goldilocks’ zone. You don’t want to buy too expensive, but you also don’t want to buy too cheap.
Buy too expensive and you may find the property hard to hold when interest rates are high, but you can’t bump up the rent. Buy too cheap, and the returns may not be at the level required for you to meet your financial goals.
As well as knowing your own numbers, you’ll need to get a grip on the property’s numbers. Aside from the obvious purchase price, you’ll want to look at
All of these factor into the affordability of the property, and your ability to hold the property for the long term.
Any investment comes with risk – and this includes property. So, what’s your ability to absorb increases in mortgage rates, loss of rental income or other financial headwinds?
This may require a bit of forward planning and crystal ball gazing, but getting a grasp of under what conditions you’ll be able to hold the property without severely impacting your own financial position will help you determine whether the property you’re considering fits in with your needs.
While you may think that managing the property yourself would be a great way to cut down on costs, a good property manager is well worth the money – and so worth factoring into the figures.
As well as listing the property and securing suitable tenants, property managers are up to date with the latest landlord and renting legislation, will carry out inspections manage tenant queries and any maintenance or repairs that are required. They’ll also have a good idea of market value, so you know your rental income is optimal. All things you’d have to deal with yourself if you decided to go without.
This is important for any house you buy, but when it comes to buying an investment property – and this relates to point two about buying new – you want to do your due diligence on the builder. You want to make sure they’re reputable, use good quality materials, and are likely to finish the build on time, to spec.
You can trust that Momentum Realty has closely vetted the developers whose houses we list on the site. Each comes with a track record of building high-quality homes and taking their projects through to completion.
While New Zealand is a nation of the DIYers – when it comes to buying an investment property, having experts on your side can help the process go smoothly.
As well as real estate experts who specialise in working with new-build investment properties it will pay to partner with:
They can provide the best advice at every step of the journey so you can get the most out of your investment with the least amount of stress.
Having someone with the right experience behind them means you can have confidence you have the right support to purchase a property that meets your financial situation and goals and ensure your investment is a success.
While property investment may seem simple from the outside, there’s a lot that goes into buying the right property and making sure you can hold it through the fluctuations of a property cycle. In this guide, you’ll find everything that you need to know about what makes property such a powerful investment option, and how to make sure you buy the right investment property to meet your financial goals.
Click here to download the New Zealand Property Investor Handbook by Momentum Realty.