According to most investment mentors, investing in real estate can be a handy way to grow your wealth. It is not an easy task or decision to do the right investment. Buying a property can be a daunting task. Even simply signing a rental agreement can be intimidating for most of us. Never mind actually getting a loan for a long term investment property in New Zealand. But there is no need to worry as we are going to take a look at the 5 mistakes first-time property investors make in New Zealand and 5 factors you definitely want to take under consideration when making your first investment purchase.
Common mistakes while investing in real estate:
The first common mistake investors make is they instantly fall in love with the property rather than looking at numerical values. Granted New Zealand does have many beautiful properties always make sure to look at area values before investing. You could find a beautiful house in a more affordable area however this would be more suitable for living rather than as your investment property. I strongly believe that you need to focus on numerical values rather than a fancy home for investing.
A second mistake is most investors don’t set a realistic budget. Remember if you have family members and children make sure to leave a reasonable budget in savings for them. Children go to University eventually and unexpected things always happen so it is best to be prudent and leave a reasonable residual income after paying for the investment property mortgage. So, you need to be very realistic while budgeting your saving.
A third and most common mistake is quite a number of investors forget to make a contingency plan if the property is left vacant for a few months. Which is the reason you should not rely on it as a single source of income. Most New Zealander thinks an investment property might generate an ongoing second income. However, it has some risk factor as well. You need to think about uncertain expenses as well.
The fourth mistake to avoid is neglecting your investment property. Everything needs maintenance. Even vending machines. Remember a property investment in New Zealand or anywhere is not a plug and play deal. Make sure to have a provision of time and money to do necessary regular maintenance of the property. It will be handy if you have an account with a local handy service provider. They might give you a bit cheaper price for ongoing work.
The fifth and final mistake is losing sight of the big picture. As busy or demanding as current situations get make sure to keep the big picture in mind. Why did you buy this property in the first place? Will it appreciate in value? Will it help me gain leverage to buy a second investment property? Always think in long term .
How to avoid mistakes while investing in real estate:
Now that you know what basic traps to avoid it is time to go over things you definitely should do when buying your first investment property in New Zealand. Cheak a few handy tips for avoiding mistakes.
The first and foremost make sure to check for how long the property is on the market. If it has been on for a relatively long time you should know it is best to steer clear from it. If it was such a good investment idea or even property for living someone would have bought it by now.
The second thing you should take into account is the median sale price in the area. This way you can gauge if your investment is in a more expensive area which is definitely justifiable for purchase if the capital growth rates have been steadily increasing. As with any good investment now is the time to jump on the bandwagon before it’s too late
The third thing you should definitely do is once you know the median property prices of areas in New Zealand make sure to invest in the expensive areas and live in the more affordable areas. There are many more property investment strategies however this has definitely worked out to be one of the lower-risk options.
You need to make sure you are clear on your goals. When you buy a property there are generally 3 things you can do with it. You could subdivide the property into smaller units and gain rental income from each. Generally this is a lower risk option. Off-the-plan is another option whereby you purchase a property before or during its construction and this is option offers the more customization options. Lastly, you could buy and old property and renovate it. Unless the house is in a high-value area this option is generally not recommended. So make sure you evaluate your goals and are one hundred percent sure of what you want to do with the property.
Fifth and most important you should definitely build an excellent property team around you. This team should consist of: A good accountant and lawyer. A Bank mortgage broker. A reputable independent valuer. Contractors for the property work and of course a property manager.
There are many more tips and strategies but these ten do’s and don’ts will give you a good foundation for property investment in New Zealand and property investment in general. To sum up,
You need to team up with real estate agent, mortgage broker, handy service provider & lawyer to get the most success from investing property. The most important part should be analysis of data. It gives you confidence in your decision. Good luck 🙂