Tips for Property Investors

Set your property investment goals: Keep asking yourself “why are you investing”. Keeping sight of the end rewards can help you stay motivated.

Understand your current situation: Get a detailed understanding of your current financial situation, the skills you may have that will help as an investor / landlord. Understand your appetite for risk. What is your personal cash flow like, as it’s likely that the rent will not cover the mortgage payments and other outgoings.

Have a team of experts handy: An experienced team of well-chosen experts by your side can make everything easier. Spend time with your mortgage broker (that’s me), accountant and solicitor. If need be I can recommend them to you.

Choose an investment strategy: Are you buying for capital gain or for cash flow? Capital gains are higher in areas where there is high demand for property. In other areas the cash flow is likely to be higher. The choice does depend on the investor; some people will be better off increasing their income whilst for others capital gain will be a higher objective.

Buy well to start with: If you can, buy below market value. Buy in suburbs that will appreciate in price at a greater rate than the market average. This means doing your research. The old saying Worst House - Best Street and location, location, location are still true!

Before you buy, think about selling: The end game is about selling and making the maximum gain. What are the factors that will attract buyer interest when it comes time to sell? School zones, good position, sunny living areas, sea or bush view, access to shopping or motorways etc. Also remember the same features that attract buyers also attract good tenants.

This is a business, treat it like one: Many first time investors choose an investment property using the same criteria they would apply to choosing their own home. Choosing a home is an affair of the heart. Property investment is about maximising a future income stream.

Ask the “What if” questions: What if interest rates increase significantly, what if I need to sell quickly, what if I have no tenant for an extended period, what if the tenant damaged the property or does not pay the rent?

Get good insurance: Not just property insurance, but Landlords Protection insurance, you can insure against loss of rents and intentional damage by tenants. I have access to a very good product.

Understand your rights and obligations as a landlord: Will you manage the property yourself or have it managed? A good property manager can save you a lot of time, emotion and money but they do come at a cost and not all property managers are created equal. If you are going to manage the property yourself then you will need to understand the tenancy law and your obligations under the Healthy Homes legislation. The Department of Building and Housing has a very good website (www.dbh.govt.nz) that will help you.

It’s a game of averages: If you can buy a house in an area with a better than average capital gain, and you negotiate a better than average deal, you do what it takes to get a better than average rent, selecting a better than average tenant — and you manage the property or have it managed better than average, then your overall return will be better than average!