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What Makes a Good Property Investment
Owning a rental property is a great way to create wealth and provide a comfortable future for your family. However, some properties make better rentals than others and it’s not always the ones you might expect. Here are our top tips for ensuring your property investment is a success.
Consider Why You Are Investing
Firstly, consider your motivation for investing in property. Are you driven by capital growth, or are you motivated by cash flow? Exclusive suburbs may appear to have a large potential for capital growth, but buying into them can be expensive – and you may struggle to find tenants who can afford a rental level that makes such a large investment viable. Remember your investment property doesn’t need to be on the waterfront or in the most expensive suburb. Your choice of suburb will be determined by a matrix of what you can afford to buy, the rent the property can attract, and what tenants can afford to pay. Once you’ve settled on a suburb and found a property you are interested in, visit at various times of the day and night to get a feel for the area. Ask yourself, would tenants want to live there?
Use Your Head Not Your Heart
It is important to remember this property will not be your family home and put your emotions to one side when you begin your search. Take time to find out what you can afford. Talk to your lending institution or a mortgage broker about pre-approval for a loan and research ongoing costs such as insurance, rates, improvements and repairs. Look for lower maintenance properties. Be disciplined and only look at properties that fit your budget.
Think About Your Ideal Tenants
As a landlord, it’s vital to consider properties and suburbs that will appeal to your ideal demographic. Residential, single-family dwellings are popular with first-time investors as they attract stable, longer-term tenants. Look for growth areas where there is a high demand for rental properties. The ideal property will be close to transport, schools, parks and shops. It’s likely you won’t find everything you are looking for, but make a list of your top criteria. School zones are very important for families. You can check out exact New Zealand school zones here.
Consider the House Layout
In some locations a certain type of accommodation might be in demand or over supplied. If couples are the predominant group looking to rent in the area you are looking at there should be plenty of potential tenants for one or two bedroom apartments, flats and units. If your target tenant is young families, then three to four-bedroom homes with sections could prove popular. Never assume that location is enough. Even in Auckland’s prime double grammar zone not every property will be as desirable as others. Don’t buy a one-bedroom apartment and expect to get a premium for the school zone, for example – a parent and child are unlikely to want to share a room!
Think Carefully About Gardens
Although you may think a large garden is a drawcard, only some tenants are botanically minded, and many will not want the hassle of dealing with one. Where tenants are not minded to maintain the garden, there is no requirement for them to do so under the Residential Tenancies Act. The ideal garden for a tenanted property is often very different to one that would appeal to owner occupiers. Landscaping, ornamental or edible gardens and established trees appeal to owner occupiers, but easy care options like good old-fashioned grass are more suitable for most tenanted properties. Consider softening the look with some hardy, low maintenance modern plants such as cycads, flaxes or Japanese maple.
Look For a Healthy Homes Compliant Property
It’s a great idea to look for a Healthy Homes compliant property. A Healthy Homes compliant property will give you peace of mind as an investor and a warm, dry, comfortable home is sure to attract tenants.
The Healthy Homes Guarantee Act is a policy that was brought in to increase the quality of rental homes. From 1st July 2021, all private residential rental properties must comply with the full list of regulations for the Healthy Home Standards within 90 days of any new, or renewed, tenancy. Buying a property that is already compliant or understanding what needs to be done to make it compliant can save you unexpected stress or cost in the future.
Consider Property Management
Many first-time investors make the mistake of thinking they can self-manage their portfolio. Engaging a property manager can in fact save you money in the long run, and will certainly save you stress. Experienced property managers such as Crockers will ensure your property is rented consistently and potential tenants will be given a thorough background check. We’ll also ensure you’re kept up to date with compliance matters - a huge weight off your mind given the hefty penalties that can apply if you get this important area wrong.
A good property manager will also provide a regular rental appraisal to ensure your property is rented at the correct level, and provide ongoing inspections to ensure it is being looked after. Any ongoing maintenance issues are also handled by the property manager. Engaging an experienced property manager such as Crockers will free you up to spend more time finding new investments and adding to your successful property portfolio.