Your property investment starter guide

If you’re looking at taking the next step to your first investment property then there’s a few things you need to consider first. Property Investment is one of the most popular types of investment in New Zealand, and it’s a big one! So, read the books, magazines, reports and religiously check trade me and realestate.co.nz to get a fair idea on what you’re looking for.

Getting started

  • Learn the basic principles you need to know about property investment

  • Understand how to turn your first investment property into a portfolio

Check your finances! - Can you afford to buy it? Rent it out? How easy will it be to rent out? Work out how much equity you already have along with any savings then get pre-approval from the bank or a trusted mortgage broker to get an indication on how much money you will be able to borrow.

Buying at the bottom
Start off with a low-cost property to make sure you can handle it. Be sure to purchase in a good location where you can generate more of a profit in the future. Also, before you jump the gun and decide on a property, make sure you thoroughly check through the Land Information Memorandum (LIM) and building report to safeguard your investment.

Rental Income or Capital Gain?
Whether you’re purchasing to rent out, or purchasing to add value for capital gain property investment can have significant financial benefits. However, it does have both pros & cons so lets break it down.

Pros

  • Can provide you with extra income, as long as the rent is higher than the mortgage payments and other expenses combined.

  • Flexibility to sell at the right time.

  • Future financial security and Tax Benefits.

  • If you have an investment property, you can also use the existing equity in the property to get another loan or to purchase another investment property.

Cons

  • Management Costs – Compared to other investment types, property is expensive to buy, sell and maintain.

  • Bad tenants can be a nightmare. Not only can they affect your cash flow, but if they don’t pay their rent on time they can cause emotional stress.

  • Sudden changes like rental vacancies or rising interest rates can put huge strain on your cash flow.

  • You may not be able to find tenants for your property quickly.

It’s easy to get overwhelmed when you’re venturing into something as fraught as property investment. But don’t give up! Tell yourself this; in ten years I’ll be leaning back with my feet up, cocktail in hand celebrating the decision of going down the property investment road.