Investing in property is often heralded as part of the Kiwi dream. Us Kiwis love our property investing! If you’re ready to take the plunge and look at investing in property here’s a few tips to get you started.
Before embarking on the search for the perfect property you first need to make sure you can finance it. Have a chat to a financial advisor and mortgage broker to see what’s possible and how you can leverage any existing assets to help with your purchase. A chat with our home loan expert Adam is a great place to start!
Choose the right property
When choosing an investment property, it’s important to take the emotion out of the equation. Part of that means looking for a rental property that will be low maintenance and make good returns.
Considerations include what the property is made of. It’s often advisable to go for a brick and tile option that’s modern rather than an old wooden villa that will need more work.
Be sure to choose a location that’s appealing for tenants. Consider the area, local schools, amenities and transport links.
Importantly, make sure you calculate the yield of the property you want to buy. Yield means calculating the cost of running the property vs the rental income that the property will make. This will allow you to calculate the return. Yield is always calculated as a percentage.
Some property investors choose to negatively gear their properties. That means they intentionally make a loss on the property in order to claim tax benefits. While popular, this is a risky option and, with the government proposing new legislation, may soon be a thing of the past.
Other ways of investing in property
So far, we’ve focussed on traditional property investing. You secure a loan from the bank, purchase a property and find tenants. The income from the tenants covers the cost of running the property.
But there are other ways to invest in property outside of traditional property investment. One way is through Property Syndication. A syndicate is where a group of investors band together to fund the purchase of a commercial property. The investors each receive returns based on how much money they have invested.
Another way of investing in property, and new to the New Zealand market, is through crowdfunding. The Property Crowd is a Kiwi property crowdfunding platform set to launch in April. Investors can pick from several properties in an online dashboard and choose how much they’d like to invest to contribute to the purchase of that property. Once the property is fully funded, it is purchased.
As with syndication, investors are not buying shares in the actual property (that would make for a very long sales and purchase agreement!) Instead, investors purchase PropertyShares in a holding company that owns the property.
Making the right choice
It can be hard to know what route to take when you’re starting something new so make sure you have a chat to our friendly team. We can offer you the right advice to ensure you make a low-risk decision that will help get you on the property investing ladder!