The media hype surrounding property news in New Zealand can often be difficult to decipher. Headlines will sometimes scream ‘BUY’ and ‘SELL’ in the same week. Gauging the market – and your place in it - can quickly become a stressful exercise. So how do you know if property investment is right for you?Here are our top tips on what you should consider before making your first investment.
1. Check your finances
Buying an investment property is going to require some capital investment, so take stock of all your finances and work out how much you have available to invest. Use an accountant to get an accurate picture of your financial situation and a bank or mortgage broker to get pre-approval on how much you can borrow. This will help you set a realistic budget and get some buying rules in place.
2. Set your goals
Have a clear strategic goal of why you want to invest in property. For example, you may intend to buy high cash flow properties and replace or supplement your current income. Or perhaps you have a plan for retirement which involves buying investment property with good, long-term capital growth prospects. Many of the most successful property investors start out with a definitive plan in place of what they want their property investment to achieve. Talk to an expert, like one of our Lodge City Rentals property managers, who keep abreast of market research and trends.
3. Be prepared to take a risk
Acceptance of risk will usually depend on your current financial situation and time of life. Close to retirement? You may be looking to limit your risk, and work on a strategy that gives shorter term returns. However, property investors planning for retirement in their 30s may have a 20-year plan to meet their desired outcome. If you are concerned about the level of risk in real estate investment - start simple. Don't over borrow or over commit and don't panic if capital growth stalls for a couple of years.
4. Don’t believe everything you read in the media
The media may be the most obvious source of information when it comes to what the property market is doing, but it’s not always the most accurate. There can often be hype around the property market – are prices increasing, falling, levelling out, is now the time to sell? Read the news to get an insight into what the market is doing, but don’t make an investment decision based on media reports alone. At Lodge City Rentals, our property managers keep up to date on the latest industry trends and are always willing to share this with you.
5. Know your strengths
Do you know your way around a toolbox? Can you repair drywall? Unclog a toilet? Property investment requires regular maintenance to ensure your property stays in a tenantable condition, but you don’t necessarily have to get your hands dirty. If you’re the type of landlord who doesn’t mind attempting some DIY, that’s fine, but for those who don’t want the hassle of undertaking regular repairs and maintenance, a property manager can do this for you. Just factor property management fees into the cost of your investment. At Lodge City Rentals, we work with trusted tradespeople who provide us with competitive costs for quality repairs and maintenance.
6. Keep your expectations realistic
Like any investment, a rental property isn’t going to produce a large monthly paycheck – well, not at the beginning anyway. There’s also the risk of investing in the wrong property, the results of which can be catastrophic. That’s where the value of working with a specialist property management company comes in. By establishing a comprehensive property investment strategy and determining your goals from the outset, you’ll have more realistic expectations of what the property investment game is all about.
7. Pay down debt first
Savvy investors might carry debt as part of their investment portfolio, but the average person probably shouldn’t. If you have student loans, unpaid medical bills or your triplets are about to start university, you will need to carefully consider any property investment you make. This isn’t to say it’s not doable, but you will want to eliminate as much of the risk as possible. Look at all property investment options. It may be a smaller property is a better investment at this stage, rather than a block of flats or a downtown apartment building. Work within your means to maximise your gains.
8. Don’t expect to get rich overnight
Understand there are weeks of the year when you may not have a tenant in your property. Whenever this happens, you’ll have a few weeks without any rental income. We also recommend putting money aside at the beginning of each tenancy into a repairs and maintenance kitty, should the need arise. Our property managers have a robust tenancy selection process in place to reduce any downtime between tenancies but we do advise our landlords that property investment should be viewed as a long-term one.
9. Be prepared to spend money to earn money
You must be prepared to invest in a property and its required maintenance to attract a higher quality of tenant and greater rent. We all want to live somewhere dry and comfortable and any extra comforts are nice perks to have. When looking at your investment property, ask yourself if it’s somewhere that you would be prepared to live. An attractive rental property will encourage tenants to stay longer and take greater care of it which means more income for you in the long run.
The decision to invest
Property investment is an exciting industry to be in. There are gains to be made and returns to be maximised. At Lodge City Rentals, our property managers work with landlords who have investment portfolios of all shapes and sizes. Some are just starting out, while other landlords are more established with over 100 investment properties to their name.
If you’re interested in finding out more about property investment, give one of our friendly property managers a call. They’d be happy to talk with you and answer any queries you may have, so you can make an informed decision as to whether property investment is right for you.
Thinking of buying an investment property?
Learn the essential need-to-knows of property investing in our free Investing in Hamilton guide.
