Residential Property Investment: What You Need to Know

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Are you thinking about buying an investment property in New Zealand? Residential property investment, if done well, can be a smart investment choice. But if steps get missed in the process of a new investment, things can go awry.

As New Zealand’s largest independent property valuation brand, we here at TelferYoung are passionate about helping Kiwis make the right decisions when it comes to residential property investment.

Whether you’re looking at a short or long-term investment property, they both require careful planning and some expert advice — to reach the sunny, and profitable destination.

If you’re in a position where an investment property has presented itself, or you’re looking for some property investment advice, read on to find out what you need to know.

Short-term vs Long-term

Property investors generally take a longer-term view on their investment. They look at the return the property is going to provide them over a longer period, based on the income they can generate from the property.

Long-term investments may look like this:

  • A subsidiary dwelling on the property
  • Subdivide and sell
  • Putting another dwelling on a new site
  • Reconfiguring or extending an existing home to create more bedrooms and increase the income stream

Other investors take a short-term view and look at how they can add value to a property quickly and sell for a profit.

A short-term investor wants to buy, get their work done and resell the property as quickly as they can. This aims to reduce holding costs and ensure they are selling in the same market to have a better chance at getting their desired sale price and achieve maximum profit.

Some investors do both, depending on the location and/or state of the existing property.

Always consider the risk

Like any renovation show will tell you, sometimes things don’t go as well as planned. When investing in property, there will be an element of risk in every scenario.

A wise property investor and one that wants to take minimal risk will be well informed and researched. Local knowledge is fundamental when looking at investment property, which can be gained from an independent and local property valuer.

What could go wrong?

There are a few common mistakes when undertaking this type of project:

  1. People buy in the wrong location
  2. They underestimate how much money they need to spend
  3. They don’t realise how long it will take to do the work and sell (if that’s the goal)

This usually comes down to the lack of research done prior to taking on the project. The investor will come to realise they should’ve reached out to services to help them make informed decisions. Informed decisions make the goal a lot more achievable.

This is a business decision

Regardless of whether you’re a long or short-term investor, it is critical to have a trusted team to call on to provide expert advice. This team could include a wide range of professionals such as:

  • What do you want out of the project?
  • How much profit do you want to achieve or increase in value?
  • How long is it going to take?
  • How much are you are going to spend?
  • Will you complete the work yourself?
  • How are you going to fund it?

Who’s on your research team?

Regardless of whether you’re a long or short-term investor, it is critical to have a trusted team to call on to provide expert advice. This team could include a wide range of professionals such as;

  • Real estate agent
  • Building inspector
  • Property manager
  • Surveyor
  • Lawyer
  • Builder
  • And of course, a Valuer

Valuers are invaluable

The role of the valuer in an investment property process is to determine the value of the property once the proposed work is finished. They provide qualified and independent advice about the location, saleability, renovation priorities, potential land values (if subdividing) and the added value of additional accommodation.

For a prospective property investor, this is invaluable information that should be gathered before the investment is made.

Last but not least: don't get ahead of yourself

Doing the groundwork before going full steam ahead can be the difference between a successful investment or a failed one.

Important things to research/establish:

  • What will the property be worth when the work is done? This will help with knowing what to pay for the property in the first place, to make it a viable purchase.
  • What’s the maximum amount a purchaser would be prepared to pay to be in the location you are looking at buying into?
  • What the property would be likely to sell for once the work is completed, then subtract all the costs involved, including: renovation, subdivision, Geotech, sale and holding costs, conveyancing.
  • The amount of profit you want to achieve if you are going to sell or the increase in income if you’re holding on to the property

Are you doing things in the right order?

All too often property valuers are called after a project has been started or a property purchased, to find the owners are going to over capitalise or have not put their resources in the right places to get the maximum benefit from their investment.

We would highly advise contacting a valuer before purchasing any investment properties. However, if the purchase has already been made they can still help guide the process to the best possible outcome.

Looking for qualified property investment advice?

With a national network of 20 offices across New Zealand and a team of nearly 170 professionals, TelferYoung’s registered valuers can assist the purchaser or vendor with our vast local knowledge in the current New Zealand residential property market.

If you find yourself in any of the above scenarios and want more property investment advice, get in touch.

 


Location: Rotorua | Posted 1 year ago