14 January 2016

Buying A Rental

Tips to becoming a successful residential property investor.


share

New Zealanders have traditionally had a strong affinity to residential real estate as an investment.

Many of us have realised that the value of our home has increased at an amount above our annual earning capacity. Add to this the strong demand for rental properties and having the tenants funding the mortgage and there is no surprise why many of us invest in residential rental properties. It is not uncommon for young New Zealanders to commence a rental portfolio and gaining the applicable tax benefits prior to investing in their first home. There are however, prudent criteria to be determined before committing as no form of investment is free of risk.

As with all forms of residential real estate, the first thing to consider is location.

Some questions that an astute investor should be asking around location are - which locations have seen the largest growth? Has that growth been been maximised? What suburbs are the next to benefit from the wave? Is the supply of properties limited naturally by geographic features such as harbour edges, motorways, topography etc? What transport links are available or on the planning board?

It pays to invest in the dominant style of property for the area you are looking in i.e. villa, bungalows, townhouse. Buy what ever is the predominant style rather than an ‘orphan’ which won’t have the same general appeal (remember when state or estate was a negative term?). Those who take the risk of buying into an area in ‘transition’ are usually the ones who reap the greatest returns. Many baby boomers will remember when Freemans Bay and Ponsonby were seen as rough areas to be avoided.

Decide how much you are willing or capable of doing to the property in terms of minor renovations and upgrades. Consider the type tenants occupying surrounding properties- ‘student flats’ may be ideal properties to sit on for four or five years whilst the area becomes ‘gentrified’. Is there added value to the property long term such as having a legal separate ‘sleep-out’, or is the property potentially sub divisible long term. Remember, all decisions around investing and managing should be based upon considered criteria.  

an investment property should never be purchased on an emotional basis - this is not a place for you to live.

It is also well worth considering having your investment property managed by quality, professional Property Managers. A good Property Manager will retain an arms-length relationship with tenants and have the ability to to select and vet suitable tenants with a positive track record.

It is vital that professional advice be sought around the ownership structure. Converting the home in which you live is not an option as the IRD will consider the purpose for which it was purchased when deciding upon taxation liabilities and benefits. Remember also, if the property is sold within 2 years, any capital gain will be taxed. Property values and rents fluctuate with economic changes. You must be able to ride out any negative financial conditions, particularly during the early days, when your equity in each property will be at its lowest. Kiwi’s naturally have confidence in bricks and mortar, but remember, no form of investment is without risk -define and quantify the risks and you are well on the road to becoming a successful residential property investor.

 

 

share

Return to blog

More recent posts

15 August 2019

Past is Present


After six years living in inner-city Sydney, architect Matt Brew has returned home, setting himself up in a classic 1970’s house that clings to a steep hillside, lushly covered in native bus…

More
8 August 2019

All Fired Up


An expanding band of artisans in our city are taking up crafts like pottery – relishing the slower-paced way of life – as they pursue their passions, work from home studios and look after th…

More
1 August 2019

Home Sweet Tiny Home


What the Tiny House movement is about and why you should pay attention

More
25 July 2019

Timeless Style


Mid Century Swag sets the stage for eye-catching, timeless and unique designer décor pieces.

More
11 July 2019

World Famous in New Zealand


Already a multi-award winner in her own country, this larger-than-life local designer has taken her work to the rest of the world, and come out on top.

More
4 July 2019

All Blacks or Tech


An All Black or Tech Innovator? – Your Child’s Decision Might Not Be So Obvious in the Future.

More
20 June 2019

Better Taste – Naturally


Little Bird Kitchen serves exciting, innovative and delicious plant-based organic food – and people are loving it.

More
13 June 2019

Looking Positive For Auckland


We all know Auckland is a fabulous place to live, but it’s also still a great city to invest in property. Here are 10 reasons why.

More
6 June 2019

Space, The Final Frontier


A solution to your decluttering problems could also offer up a cash bonus.

More

Contact Us

Are you interested in knowing more about one of these articles? Please fill out the form below to get in contact with us.