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

21 September 2017

Art of Glass


In this age of Ali Express and mass-produced rip-offs from Asia, it’s heartening to see a local business thriving by producing individual pieces that put authentic craftsmanship first.

More
19 September 2017

August Market Wrap


Recently released figures show that sales numbers across the country fell by almost 20% in August – but not in greater Ponsonby, folks. And certainly not at Ray White Damerell Group!

More
14 September 2017

Tactical Urbanism


Tactical Urbanism might sound like some kind of guerrilla warfare. In reality, it’s just one of many tools helping to resolve Auckland’s traffic woes.

More
7 September 2017

Big Fun


Intensification is biting into the traditional pavlova paradise so Auckland Council is dishing up an array of enthralling playgrounds to capture city kids’ imaginations.

More
7 September 2017

Happy Ever After


Harry and Gwen laugh at the idea that 68 years of eating their own homegrown produce from their back garden is responsible for their good health.

More
31 August 2017

Planting For Our Future


Being good neighbours by actively participating in environmental initiatives is a core part of our business philosophy, says Ray White’s Simon Damerell.

More
21 August 2017

July Market Wrap


July saw a fall in the number of properties on the market, which should come as no surprise as vendors and buyers play a ‘wait and see’ game until after the results of next month’s election…

More
17 August 2017

Making His Mark


Decorative artist Ross Lewis ‘love affair’ with wall space began when he was just four years old. Since then his art has developed and exploded across walls and ceilings.

More
10 August 2017

Sound and Vision


Retrofitting the latest, smart audio-visual and security systems into an older-style home may be easier than you think.

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.