Property Investment Basics
Property has always been a popular investment in New Zealand and many Kiwis have created a lot of their wealth through owing and renting property, but some people have also lost a lot of money and even everything through bad property decisions.
It is important to consider the principles of investment and in particular have an understanding of the property investment basics before you start buying investment properties, but even existing property investors can benefit from some extra knowledge and that is what the advisers at North West Mortgages can offer.
For most people getting their first investment property is one of the biggest true investment decisions that they will ever make.
The most common way to fund an investment property purchase is using the equity from your home. You have probably owned your home for a number of years and have a sizable amount of equity which means your current bank will allow you to borrow the money required to buy your first rental investment.
Selecting The Right Rental Investment
What makes a good investment property?
Once you have decided that you would like to buy your first rental investment, there are a number of things you should look at including finding a suitable property. You need to consider the price, decide on the area and to choose the type of property – a house, townhouse or flat of apartment.
How much do you spend on a rental investment – the price you pay should be determined on what you can afford to pay for the property (the asset) and how the financials (cashflow) suits your current financial situation.
Where should you buy – different areas of New Zealand and even suburbs within a city will provide a different return on investment or yield. The yield is an important consideration as this determines if the rent will cover the mortgage interest and other costs, or if there is a shortfall which you will need to fund.
What type of property is best – there are houses, townhouses or flats and apartments which are all purchased by people as investment properties. All residential property is made up of land and buildings – the land is what typically increases in value and the building is what people pay to rent.
While any property can all be used as a rental investment, different properties suit different people and if you want to be successful you need to ensure that you buy a property that suits you and your finances.
Don’t Just Buy One Investment
Too often Kiwi property investors get stuck with just their home and one rental investment as they have purchased a property that does not suit their financial situation and/or has not structured the finances correctly.
Too often property investors do not use specific property investment loans and have the loan directly linked to their home and other property.
At North West Mortgages we run a workshop to show first time investors and even seasoned property investors the advantages of building a small property investment portfolio. This workshop is called “Thrive From Five” and shows people how to create a small quality property investment portfolio that can produce a significant passive income. Contact us for times and availability for the next workshops.
We have also created a Facebook Group called Kiwi Property Investors so people can share information on property investment. CLICK HERE to visit and join the group.
If you would like to know more about what we can offer, contact an adviser today who can help you understand more about property investing in New Zealand.