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

24 May 2018

Environmental Sea Change


After enduring years of the old Council’s long term neglect, Aucklanders have reached a tipping point. The environment has suddenly become mainstream.

More
3 May 2018

Loveable Rogues


Being a good Kiwi, Mark Neal considers it his birthright to challenge the norm – and this attitude has spurred him and two cohorts to establish Ponsonby-based artisan gin makers, Rogue Socie…

More
19 April 2018

A Hub for Good Food


End the week and start the weekend by savouring the tastes at Streetfood Station Food Truck Friday and Saturday mornings farmers market at Mt Albert Market.

More
22 March 2018

Do you like good music?


Now in its twelfth year this annual celebration of music and community continues to be one of the highlights in the Waitakere year.

More
15 March 2018

Wait Five Years, or Pay Tax


As early as the end of this month, the Bright Line Test (BLT), brought in by the previous government to dampen property speculation will be extended from two years to five years, meaning tha…

More
1 March 2018

Can You Trust a Trust?


When you’re buying residential property, is a trust the best ownership structure for you?

More
22 February 2018

Heritage Champ


Working across a sweeping array of projects, Rod Marler, director of Place Shaping for Panuku Development stands at the helm of a Titanic portion of Auckland’s built future.

More
22 February 2018

More on Meth


Meth is a scourge that affects both landlords and tenants, alike. At Ray White Damerell Group, our priority is to protect both sides by ensuring our properties are regularly tested.

More
7 February 2018

Dynamic Duo


Two top performers join the burgeoning team at Ray White Mt Albert, bringing with them a wealth of experience and a refreshing and positive attitude to real estate sales.

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.