So you’ve been thinking about your first investment property? It can be a great idea if you’re wanting a nest egg for the future, especially if you’ve already got plenty of equity in your own home. However just don’t see it as a regular form of income, as often the rent doesn’t cover the expenses, so it’s about a forced type of saving and the long-term gain. And make no mistake, it’s not all that easy, otherwise everyone would be doing it. It can come with plenty of worry, drama and hard work. But if you like the physical bricks and mortar type of investment, and you’re quite handy, it can be a very worthwhile option.
So how do you choose an investment property? Well, of course, I am willing to help with that, as I frequently seek out rental properties for clients. And buying in an area and market you know well is ideal for your first investment property. However, you should have a few things decided first.
What area/s are you looking in? Remember you are not buying a home for yourself, so don’t fall into that trap. Do some research into what areas are best for rental properties. Some areas fetch the same rents as others, yet are more expensive to buy in. And it’s about long-term gain, so consider up and coming areas. Also, the quality of the neighbourhood and demand for the area will also determine the pool of potential tenants you have, along with schools, bus stops and proximity to amenities.
What type of property do you want? Consider off street parking, garaging, outdoor space, number of bedrooms, a dishwasher and fencing, as some of these are deal breakers for prospective tenants. Also, what amount of work, if any, are you looking for? Remember un-tenanted time costs, and if you’re not in a trade yourself, it can get expensive, eating into any profits before you’ve started. So be realistic and don’t bite off more than you can chew. Bearing in mind too, the new law changes regarding insulation, so this could also be an additional cost – or are you only interested in something that already complies?
What price bracket should I look in? It’s about the long-term financial return, and you’re looking for something that’s healthy and easy to maintain. Think about the type of renters you are trying to attract. If you’re thinking of purchasing something really nice so the rent is higher and you get better tenants, bear in mind that a rent equal, or higher, than a mortgage means there could be a possibility of attracting transient tenants between their own homes. Although this may equate to peace of mind, it could also equate to frequent vacancies. You need to have a good understanding of the costs and what you can afford, but also what is most likely to get a better long term return. So, talk to your bank manager, accountant mortgage broker or financial advisor and do your sums. Beforehand though, there are plenty of calculators available to give you some ballpark ideas. Interest.co.nz has a really good mortgage calculator and Westpac Bank have a good property investment calculator.
These days there is also a little more to consider. With the increasing prevalence of methamphetamine production or ‘P’ labs, landlords are facing a new era of investment risk. So how does one reduce that risk?
Get decent rental specific insurance. As some put caps on the repair cost of affected houses which doesn’t always cover it. Make sure you understand what is required of you for them to pay out. Some have introduced compulsory meth testing between tenants; some require 3 monthly detailed recorded inspections, and some are even recommending meth minder. Meth Minder, you say? Yes, a new type of alarm for Meth, not burglars. Meth Minder is a silent alarm system designed to detect the manufacture of methamphetamine (‘P’) in your property.
You also need to consider a property manager too, as there is a lot to comply with and this too can help reduce your risk. We are able to offer options for your property management requirements.
So if you feel like an investment property is a good move for you, then bring me your brief. As soon as something that fits those criteria is on the market I’ll let you know and we can get you on your way to being a property investor!
About the Author: The above article on Your First Investment Property was written and provided by Brent Palmer, a local leader in the field of Richmond and Nelson Real Estate sales, marketing, advanced technology for home selling, and social media.
You can contact Brent Palmer here, or at 027 544 9921. He has helped many people buy and sell homes in the Nelson, Stoke and Richmond areas for years, and would love the opportunity to help you as well.
Thinking of selling your home? I have a real passion for helping people sell their homes in our Nelson and Tasman Region, as well as the marketing, social media & advanced technology for home selling that goes along with it. I’d love to have the opportunity to sit down with you discuss how we can work together to get you the best price.
I help people buy and sell real estate in the following Nelson and Tasman towns & neighbourhoods: Wakefield, Brightwater, Hope, Appleby, Redwood Valley, Mapua, Stoke, Tahunanui, Atawhai and of course, Richmond and Nelson City.
Connect with Brent on Facebook and pretty much everywhere else.
Know someone who needs help with real estate?
Be rewarded and REFER them here.