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The Beginner’s Guide to Property Investment in New Zealand
There’s a lot of reasons to consider investing in property. While markets do fluctuate, most people find property investment very beneficial over the long term. The best thing about property investment is the variety of ways you can go about it.
However, there’s a few things you should know before you start your property investment journey. Here’s a beginner’s guide to help you get started.
Understand Your Finances
Finances are the key to any investment strategy. You need to know what you’ve got at your disposal, and how you can manage moving forward. For example, if you buy an investment property and rent it out for less than your mortgage payments, you’ll need to cover the shortfall. While there’s tax benefits associated with this, you still need that cash flow to make it viable. Especially if you also have other mortgage commitments.
The best way forward is to speak with a financial planner. If you can find one with property investment experience, that’s the best option. Talk to them about your plans, what funds you have available, and what sort of cash flow you can expect. Once you understand your financial situation, it’s best to approach a bank or mortgage broker to seek pre-approval before you start shopping for properties. That way, you’ll know your limitations in terms of property price.
Plan Your Investment Strategy
Understanding your goals is crucial to success in property investment. Do you want a property with high rental yields to supplement your current income right now? Or are you looking for a longer-term strategy on properties that deliver capital growth (meaning, their value increases over time)? There’s no right or wrong answer here, but it’s all down to your individual goals.
Your current situation should reflect how you approach risk as well. For example, if your strategy is long-term, you may be happier accepting some investment risk. If you’re close to retirement, you may want safer, more predictable investments.
Here are a few strategies to consider:
Purchase at low prices: This could include buying a property below the suburb median price, with a view to renovating and increasing the value. You might also simply look for discounted properties on the market.
High cash flow: Looking for properties that will instantly have high rental yields, and give you more cash flow than your outgoings.
Sub-dividing: Purchasing property or land, and adding additional properties. You can sell them for a profit, keep them for rental income, or a combination of both.
Buying from the plan: You can purchase new properties based on their plan and location alone. This strategy relies on the property’s value increasing between the time you pay the deposit and final settlement, for instant capital growth.
Do Your Research
Finally, the most important thing is to do your research thoroughly. Have a clear strategy in place and surround yourself with people you trust (financial advisors, builders, valuers, lawyers). Whether you want long-term, safer growth or a more high-risk short term result, understand your plan and research everything thoroughly.