Back to basics: 3 things to consider when purchasing an investment property
There can be little doubt that investing in a New Zealand property is one of the most reliable sources of income out there right now. Not only do profits tend to rise year-on-year, but it's a cashflow that is never likely to run dry. After all, the rising population of New Zealand is always going to need somewhere to live, especially in the bigger cities such as Auckland, Hamilton, Tauranga and Whangarei.
As such, investing in a property in New Zealand makes sure sense, but there are still a raft of things that you need to consider before taking the proverbial plunge. It can be easy to look past the basic factors of choosing an investment property as you get lost in the nitty-gritty of the nuances of the process, so in this article, we're going to give you a timely reminder. Here are three things to consider when picking out your prime investment.
Investing in a New Zealand property is one of the most reliable sources of income out there right now.
Choosing a suitable suburb
One of the biggest choices that you'll face when buying your investment property is its location. This will have a huge bearing on the overall success of the investment, as it will feasibly determine the kinds of tenants you attract, the rental fees that you can set, and a whole host of other factors.
Think of it this way. If you were to snap up a place with a university in the vicinity, it's likely that many of your prospective tenants will be students. Though this in itself isn't necessarily a bad thing, your turnover of tenants will be higher than average, and your property may even sit empty during non-term times, losing you money. Additionally, though students are a reliable source of rent (that student loan has to go somewhere, after all!) the selection process can be a terrifying game of chance – you can just as easily get wild party animals who may damage your property as you can meek, mild-mannered ones. Certainly something to ponder!
No, we don't mean fall foul of the law during your investment property quest. Rather, we're talking about studying the crime statistics of any potential areas where you're thinking of investing. These are easily available from NZ government websites, local police or the public library, as well as good, old-fashioned word-of-mouth. After all, no one really wants to live in an area where they risk getting mugged each evening on the walk home from walk (even though the rent might be cheaper), so you'll need to carefully consider your options once you've uncovered some hard statistics.
You should pay particular attention to vandalism rates (as you don't want to be replacing the living room windows each week) type of crimes and, importantly, current trends. Perhaps an area used to have a bad reputation, but has since become gentrified, or a suburb that was once thriving has fallen on hard times recently. It's a tough choice to make, but one well worth your time.
One of the core reasons for getting into investment property in the first place is reap the financial benefits that come with it.
Review your rent
Of course, one of the core reasons for getting into investment property in the first place is reap the financial benefits that come with it. Therefore, setting appropriate rent levels is an important part of getting off to a good start, and you can do this by researching the average asking price in the area before you buy. if it turns out that you cannot afford to pay the mortgage, taxes and the other expenses that come with purchasing a rental property, you'll have to look elsewhere, as tenants won't simply won't pay more than they should be for where they are living.
You should also try to gain a sense of where the area might be a few years down the line, which isn't always easy. Are there any developments coming up that may have a bearing on your rent, or something similar? Speaking to a local council can help you get a clearer idea of what is happening.
Be sure to get in touch with the friendly, helpful team at Good Life Advice to find out how we can help when it comes to property investment – we look forward to hearing from you.