09 May 2016

How to pick a good investment property

IT’S ON THE HOUSE - Insights and advice for property investors & home owners.


How to pick a good investment property

“If you are clear about what you’re looking for, now is as good a time as any to invest,” iFindProperty CEO, Lisa Dudson says. Obviously investing in residential property is a big commitment, especially if you’re just starting out, and the range of residential properties on the market varies significantly. So what’s the secret to picking a good property?

Good versus poor investment properties

As well as attracting trustworthy tenants who always pay rent on time, a good investment property is more likely to be well looked after. Quite simply, if it feels like home, tenants are more inclined to treat it like their own. Long term, this should mean lower maintenance costs and rental arrears, less vacancies, higher rent and, most importantly, increased value. This value growth lets you expand your portfolio more quickly (assuming that once you’re on the property ladder, you won’t want to get off).


A poor residential investment property can be a different story. Unreliable tenants, irregular rent payments, constant maintenance… you get the picture. With low value growth, a poor investment property will slow your portfolio expansion.

So before getting your foot in the door, it’s important to have a clear idea of your investment criteria. We’ve put together a few tips to help you.

Top tips for finding a good investment property

  1. Do the numbers first. Unlike buying your own home, investing in residential property is about getting maximum return. It’s vital that you determine whether a property will steadily and reliably produce income and capital growth.
  2. Evaluate the property’s potential. Is there an opportunity to add value? Is the property in a high growth area? Investigate. According to Lisa Dudson, identifying which properties or areas have more potential for growth can take “hours and hours of research”.
  3. Think about what sorts of properties are most attractive to tenants. Obviously the more money you can rent your property for the higher your return will be. How, over time, can you increase the rent you’re likely to get?
  4. Keep in mind that cheaper residential properties generally offer a better return than more expensive homes. Almost 80% of leases are signed with people under 35, usually two or more sharing, with each paying part of the rent.
  5. Location is key. Currently the highest demand is for properties within 8 kilometres of the CBD.
  6. Understand that location affects the typical tenant profile and use this information to target a particular profile. Families value good school zones, for example, and retirees usually look for places within walking distance to shops and public transport.
  7. The number of bedrooms has the biggest impact on rental value. Other major factors include: number of living rooms, number of bathrooms, outdoor entertaining areas, car parking and/or garage, location, presentation, fixtures and fittings, and facilities (for apartments).


Mistakes to avoid

Some of the common mistakes made by new investors include “not doing the numbers first, not getting advice first, and getting too caught up in the hype – buying because everyone else is buying and not looking at the risks,” Lisa Dudson says. Lisa also stresses that finding a good investment property depends a lot on your own circumstances. “Your personal circumstances should help take you through an elimination process.”

Do your homework first

So where do you start? Websites like Trade Me and realestate.co.nz as well as real estate magazines give you an idea of what’s on the market and help you build a clear picture of what you’re looking for. Real estate agents and property managers can also be a good source of information and many will be happy to share it with you. Visiting properties and checking whether they meet your investment criteria can pay off as well.

Remember, also, to safeguard your investment by arranging builders’ reports and getting professional legal and financial advice. And once you find a property that ticks all the boxes, you’ll need to take the time to make offers and counter offers.

Talk to the experts

For insight on the current market or a free rental appraisal, be sure to talk to someone from your local Quinovic office. We’ve been around longer than any other property management company in New Zealand and manage houses and apartments all around the country, so we know a thing or two about residential investment properties. We’re also happy to give you tips on what improvements you can make to your property to help increase the rent.

If you do your homework, do the numbers, and pick the right property, investing in residential property should prove a rewarding move, personally as well as financially. Best of luck!

 

The experts in property care and return

For more information on the tips above, download our Investing in Residential Property guide or get in touch with us.

Is there a topic you’d like us to explore in future blog posts? If so, please leave a comment below.