Investing in property could be a great way to take control of your financial future. So whether you’re new to property investment, or you’re building on your portfolio, here are some key things to consider if you’re in the market to invest.
What are the benefits?
Most people buy property as a long-term investment. But there are many other benefits, like equity inflation, capital appreciation gain, and more stability when compared to other types of investments like the stock market.
And as you build up equity in your investment property, this opens up the possibility of buying more properties or making other investments.
The big question: can you afford to invest?
One of the first things you need to figure out is whether you can actually afford an investment property. Calculating your budget is an important part of the process. So get started by crunching the following numbers:
- How much equity do you have in your existing home?
- How much money do you have saved?
- How much do you need to borrow and can you afford the repayments?
- If interest rates go up, can you still afford the repayments?
You might just discover that you’re closer to achieving your goals than you think.
Making a plan
Everybody has different reasons or motivations for investing in property. Do you want to set yourself up for retirement? Or do you want a property that you can pass down to your kids? Whatever your reason, you need to ask yourself these questions and make a plan for the future.
Finance options
Did you know that any equity stored up in your current home can go towards purchasing another property? There are many ways you could fund your investment property, which one you choose depends on you and your circumstances.
You’ll also need to decide what kind of loan to get. Interest only loans are a smart option for investors who want to achieve capital growth on their property over a shorter term.
Click here to find out more about your home loan options.
Property selection
One of the biggest worries many investors have is that their property might sit vacant on the rental market, so choose a home in an area with a high population rate and a high sign of rental demand. Also, look at areas that have a steady growth in value.
And if you’re worried about on-going maintenance and repair costs, then find a property that’s in good condition, as this will limit the costs.
10 common mistakes to avoid
Many New Zealanders make a number of mistakes when it comes to managing an investment property. So to reach your goals more quickly, be prepared and avoid these common pitfalls:
1. Property investment won’t solve your financial problems
Just because you own an investment property, doesn’t mean you’ll automatically be wealthy. To make money, you need to put in the work and this takes time.
2. Do the numbers
Before you spend hundreds of thousands of dollars, you need to understand the costs involved. This could make the difference between a purchase being a good investment or a long-term drain on finances.
3. Understand the risks
Many people get caught out by believing that property prices only ever go up. Most risks can be minimised, but you’ve got to know where they are.
4. Get advice
Avoid mistakes by getting advice from those who have already seen others make them. There are plenty of stories out there, so make sure you talk to the right people.
5. Finance isn’t just about getting a loan
Getting money in the bank is the “easy” bit, but many people don’t think about how they structure their mortgages. Talk to our Property Investment team.
6. Manage your property well
Many investors don’t review rents as often as they should or they don’t know how to deal with a tenancy problem. Always have additional money set aside to cover repairs and maintenance, to avoid being caught out in the future.
7. Doing due diligence
Many people let their emotions get in the way when buying an investment property and sometimes end up paying too much, or end up with a leaky building. Take time to do enough research pre-purchase.
8. Don’t just be interested when the market is hot
A lot of people become property investors when house prices are rising. In reality, you should be buying when the market is low.
9. Understand the difference between a home and an investment property
Your purchase should be driven by things like numbers, on-going maintenance and the local rental market – not how attractive or homely it is.
10. Buy in the right location
Look for property in places where there is population growth, infrastructure and employment.
Ready to invest?
Our dedicated residential property investment team are here to help you. So once you’ve done your initial research and believe you are prepared to take the next steps, get in touch with us today.
This information is for general information purposes only. To the extent that it contains financial advice, it does not take into account your particular financial situation or goals. BNZ recommends that you seek advice specific to your circumstances from your financial adviser.
