Your Guide To NZ Property
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According to recent REINZ figures, New Zealand house prices have hit a record annual high. And the biggest increases were in the regions with Whanganui/Manawatū seeing the second highest annual rise at 20.9 per cent.
Property valuer Robert Spooner says it’s just that Whanganui is slow to react, and the price hike isn’t out of step with anywhere else.
Purchasing an investment property seems pretty simple; search for a property, finds funds to invest, manage your property, and start again.
Is it all that simple?
There are indeed a few things you need to know before buying a real estate investment.
It’s best to buy from someone who really wants to sell
One of the basic rules is to buy well. To buy well, there are no secrets, you have to buy from someone who really wants to sell. The first rule of rental investment is simple; you make your profit from the purchase, not the resale. If it’s not the case, it’s not worth it.
If the purchase price is too much, even a perfectly managed property will not restore the profitability of your investment. You should buy at the right price because there is no way you will know the state of the market at the time you want to resell. Don’t bet on an increase on the price of the property. By focusing on immediate profitability, you won’t have to sell your property if you cannot afford to maintain it.
Find a seller who does not earn money with his investment, who lives far away from his property and who has to move. It’s even better if he is poorly informed of the market prices. The purchase price is decisive. Do not pay too much for the property and do not overestimate the rental value.
People without clear targets make bad investors
For a first investment and depending on your borrowing capacity, the choice is often between a studio and a 2-room apartment. Regardless of your choice, you must be consistent and use common sense. If you target students, small flats are the best choice.
Your target will also decide the location of your investment property. Everyone knows that location is one of the key factors for a successful investment.
In the example of a studio for students, the location of the property is decisive. If you aim to rent this studio to young workers, the criteria will be different. Know who you are aiming at. Depending on the population, there are advantages and disadvantages, for example the fact that students usually stay for a short time.
Do your research, visit a lot of properties and make a list of options
Wisdom dictates that you should shop around and visit many properties before buying. There are many different ways to find suitable properties: the Internet, newspapers, real estate agents…
First things first, start with the Internet. Keep in mind that the things that attract people are simple; work, schools and reputation. If there are many jobs, the city will attract workers. If a neighbourhood has a good reputation, it’s even better. University cities are also popular with students.
And ask yourself a lot of questions. Is the local infrastructure good? Are the city or neighbourhood properly managed? Is the local economic activity progressing?
Secondly, talk to people. Meet, discuss and check your findings with local residents. Are your conclusions validated? Could you define the trend and imagine how the neighbourhood will be in 10 years? Are there any constructions or changes likely to influence the market? Will global warming impact my property?
Thirdly, check the immediate environment of the property you are targeting. Access to shops, schools and transport are three key points. The access to certain amenities determines the attractiveness of a property for a tenant. Likely you will need to compromise on some things.
There is never a single market, even in a neighbourhood. Sometimes a few streets are enough to end up in a very different environment. Learn to differentiate sub-markets.
The number of properties to visit can be limited by the configuration of places but the basic principle is simple; the more you visit, the more likely you will find an interesting property.
Visiting properties should only start after having made your research and defined your objectives. Ideally you should buy your property from someone who is struggling to sell. You might want to avoid being in competition with all investors.
It’s always better to buy near your home
This advice is simple. If you can, buy near your own home! The alternative is to buy in a place that you know well, for example the city where you come from.
Proximity is necessary for 2 reasons. You really know where you buy, and you’ll be able to intervene in case of problems. It’s even more important if you intend to manage the property on your own.
There are of course many examples where remote management is going well, but it’s always annoying when you have to move to solve small issues.
Form a team that understands how to invest in rental real estate
You must consider that the first investments are a learning process. A real estate agent, a notary and an accountant are 3 members of your team that you must select with care. Sometimes good property lawyers are also necessary, especially if you are planning on setting up a trust.
Other members may also be architects, insurers, bankers and surveyors. If you really want an efficient team, you will have to create a team. Possibly, the members will be complementary, can debate about an idea, have the same goals, and share the same values.
Never go by your instinct
In any investment, you have to analyse the deal rationally. The best way is to establish a written list (typically on Excel) of criteria. The list of criteria guarantees that you do not fall in love with a property and start comparing properties with your heart.
Analyse the property from every angle. Pre purchase property inspection is key. Too many people buy meth contaminated homes. Besides testing for methamphetamine in a home, there are so many other elements to look at but that does not mean that you must avoid checking all of them. If you find a problem, this may not be a reason to cancel the purchase but to negotiate the price accordingly. In this case, ask for a professional’s quote.
The city is shucking off zombie town accusations as newcomers buy up housing and boost consumer spending.
Median house prices across New Zealand reached a record high of $597,000, up from $560,000 in September 2018, according to the Real Estate Institute.
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The Westpac prediction comes as the latest data from the Real Estate Institute shows prices picking up after a sluggish period.
In its Home Truths newsletter, Westpac said the cancellation of capital gains tax combined with tumbling mortgage rates would push prices higher.
The council has released its latest annual report, with Auckland’s housing shortage a key priority and its available stock sitting among the world’s most unaffordable.
The ever changing world markets are putting a large amount of strain on investments. Property lawyers would always advise that land and property is the best investment that can be made. Many of us look for houses for sale as a thing to invest in.
Buyers look for a first home mortgage with the view that these investments will mature and keep their money safe. Most trust lawyers will agree that having properties in your portfolio has always been good advice for those that want to have a long term investment that will produce a good yield.
However, house prices are not rising as fast as they once did. World trading markets have slowed which means that the property market as a whole, is often put in a question to see whether we should invest in it at all. The procedure of buying a property can be quite complicated, with things like a pre-purchase building inspection which is required before you proceed and it also helps to reinforce the notion that property markets are something to avoid in general.
What to avoid
Short term investments and quick fix get rich quick schemes are not something you should get involved in as property, in this day and age, is a long term investment. That said, very popular areas can still have some buoyancy in the market but there is no guarantee on a return on a short investment.
The type of property that you pick also determines whether it is a quality investment or not. Larger properties don’t sell as easily as smaller ones. Although large amounts of profit can be made on a larger property, this is something that you shy away from as the amount that can be lost is a lot more than it would be on a smaller property.
Try to avoid student areas as this type of market will be saturated with student rentals. The rental market can be quite lucrative if you are thinking of a buy to let property for instance, and a student area may be suitable in this case. However, if its a main residence for yourself that you are after, you want to avoid areas overpopulated with students.
Talking to a financial advisor about the best way to get a good deal from a rental is a good place to start as rental properties are not as they may seem. For example, the layout of a property could be the difference between getting a good rental income and a bad rental income.
The rural property market can go either way, like with other aspects of the property market. However, as many cities are now developing more environmentally friendly infrastructure, investing in rural areas may not be advisable as more money is being pumped into inner cities as opposed to rural areas.
You may find that modern advances take a while to filter through to rural areas. Areas of natural beauty are still worth investment, but you have to make sure that you are getting a good deal in the first place and you are not just relying on the look of the rural location.
Things to invest in:
High end and luxury properties are in demand because they often offer the latest in technology and are very environmentally friendly. This is a huge selling point and is very popular amongst buyers. Investing in this market can prove to be very beneficial because the property prices will remain stable and could in fact increase.
Flats or serviced apartments are popular in inner cities and the demand for high spec properties has never been more sought after. Some modern apartments even have electric charging points underneath of the buildings which give this form of living loads of positives and very few negatives.
If you can buy a property cheaply enough and you have good planning and preparation skills, you may find it beneficial to renovate a property relatively cheaply and be able to sell it at the maximum price. Again, as above, the location and what you buy are very important so that you don’t have a poor investment, but if you buy well, this is one area that is recommended for those that want to make money on their investment.
Renovations can be done on a grand scale but this is risky as you are investing more money into the property. However, if it’s done well, investing more could in fact be beneficial. However, the safest renovation projects are those that can be undertaken by you as an individual, which means you are only buying materials. Alternatively, if you know someone that can help you to keep the costs down, this will make your renovation project a success.
The final property market to mention is probably the riskiest, but if done well it can be one of the best options. Buying a patch of land and designing and building your own property will give you the property of your dreams. The negative to this is that you may find yourself having a property that you like but doesn’t appeal to anyone else.
If, however, you build a property that suits the masses, you could save a lot of money on the build and make money on the sale which will be regarded as a very good investment. Investing in self build properties is only advisable if you are extremely good at planning, good at sticking to a budget and have some experience in property building previously, as the risk of it going wrong is great so minimising that risk is crucial.
It’s clear to see that there are a number of ways to pick the right investment for you and avoid negative property markets this year.
Should you buy or lease? Most people are usually swayed by the opportunities rural communities bring to businesses. Some are looking to spend less, purchase multiple properties or pay fewer taxes. But it still boils down to deciding on whether to buy or lease a property.
The problem associated with investing in a rural property is that extensive research and experience in real estate is needed because more risks are involved. So it’s important to understand the pros and cons associated with buying or leasing a rural property. Knowing this will help you make the right investment.
PROS OF BUYING
LONG-TERM BUSINESS OPPORTUNITY.
The increase in population growth and expansion leads to more developed land. Though there’s no guarantee, any rural property you buy could eventually increase in value as developers begin to buy up land.
This provides you with the opportunity to own an investment property with consistent cash flow with an added opportunity of selling for large profits in the future. Rural areas also give you the opportunity to buy multiple properties and to build and expand your portfolio to make larger profits.
MORE CONTROL OVER YOUR PROPERTY
Buying land in a rural area gives you control over your affairs. You’re in control of the management decisions, whether it’s determining environmental farm plan practices, choosing the crop rotation or making improvements on the property. You don’t have to deal with land-rent contracts, rent renewals or terminations.
PROPERTY PRICES ARE SIGNIFICANTLY CHEAPER
In the rural areas, you can buy properties significantly cheaper than you would buy in an urban city. Outside the urban zones, most single rural properties usually have an average of one offer per property. This as a result of the lack of competition in rural zones and as this continues, the prices of properties get cheaper.
In some scenarios where there’s an auction sale, there’s usually one interested buyer at court auctions. The average price usually ends up to be as low as half of what would be paid in an urban city.
CONS OF BUYING
FEWER PUBLIC SERVICE
Buying a rural property comes with its own challenges. A rural area doesn’t offer the same type or quality of service you will find in big urban cities. This discourages investors looking to buy a property to rent out due to the lower number of people migrating to rural areas.
SMALL SCALE ECONOMY AND MARKET
One thing for sure is that rural properties come with a level of risks. Economic opportunities are not easy to come by because finding a tenant or buyer for a property usually takes a long time.
If you decide to lend money to buy a rural property, it is advisable to not rely on any revenue generated from the property to repay the loan. Instead, look at your purchase as a long term investment that won’t bring returns anytime soon. You should be prepared to wait for the return on investment.
POOR TOURIST ATTRACTION AND AMENITIES
Aside from houses for sale being cheaper, rural areas are more quiet and peaceful than the urban areas but it comes with a cost. The rural areas don’t have a culture of tourism, this is due to the lack of tourist attractions, the availability of fewer amenities and public services including its proximity from the urban areas. These challenges mean that you could have a low margin profit if you decide to use rural properties as Airbnb investments.
PROS OF LEASING
MORE PURCHASING OPPORTUNITIES
When you don’t have tied up cash in land purchases, it will be easier for you to buy important equipment, livestock or crop inputs. This can even encourage your business growth and expand your production.
FLEXIBILITY IN BUSINESS
Leases usually involve a short term contract (up to only one year). This gives you the flexibility to change your business size or location by giving up previous leases or leasing other properties. For instance if you decide to move your business location in order to seek better economic opportunity, you can easily give up your old lease to lease another property in your preferred location.
ASSISTANCE MAY BE OFFERED
As a new or beginning farmers, getting a farm land on lease is the more affordable way to develop your farming business. Chances are your landlord (having previously farmed the land) may be willing to offer management skills or advice.
CONS OF LEASING
LESS ACCESS TO GOOD FACILITIES AND SERVICES
The quality of public services in the rural area is low compared to the urban regions. As a lessee, it will be difficult to find good resources and services to expand your business.
POOR SECURITY
Getting a property on lease in a rural area comes with some risks. Most rural areas are associated with poor security. If you rent a farmland that is not properly secured, your livestock or crops are likely to be stolen.
POOR CASH FLOW
In most cases the people with higher spending power reside in the urban cities. The opportunity cost in a rural area is cash flow this is because when you choose to rent a property in a rural area there’s a trade-off between cheaper rent and having to transport your goods to the urban area when there’s a higher spending power.
BOTTOM LINE
Investing in a rural property can bring great opportunities to your business if as an investor you’re looking to invest in something different like commercial property investment and you’re willing to wait as long as is needed to gain a reasonable return on investment. If you choose to rent or buy a rural property, you should be able to live and deal with all the challenges that come with it.
It will be very difficult to recover the money you invested as soon as you have made the purchase. Carry out extensive research before you decide to rent or buy a property. Find out any valuable information regarding the kind of property you are interested in.
Are there regulations/restrictions that would affect your business? Who would your landlord be? Talk to your financial advisor or lender, consult with an experienced commercial property appraisal professional to get all the required information regarding marketing, lease and cost analysis.
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The triangular-shaped former livestock grazing block is now for sale by tender through Bayleys Whakatane, closing at 4pm, September 11. The property features in Bayleys latest portfolio magazine.
The sale follows the development company, Auburn Development, owned by David James Oliphant of St Heliers, Auckland, being placed in the hands of a voluntary administrator at the end of July.
Despite the rise in real estate in major countries, there are still some unbelievably affordable countries in the world to buy a property. These countries promote an austere and lively atmosphere. The increasing rate in expatriates has led to a booming growth in the property industry sectors like property management companies. Whether you’re looking to purchase a second home for real estate investment or for vacation reasons, here are the top cheapest places you should focus your attention on, as these locations dominate as markets of opportunity.
BULGARIA
Bulgaria is a beautiful European country filled with amazing landscape and stunning architecture. It is one of the cheapest places to live in Europe. Generally due to cheap land you can buy a good plot of land for price under 10 000 euros. Though pricing is mostly affected by demand and supply, you can find a house for as low as 18 000 euros. Bansko is an example of a great place in Bulgaria, it is now quite cosmopolitan with good infrastructure making it an attractive site, most especially for foreigners. It’s also filled with high mountains that provide a perfect opportunity for memorable skiing experience during winter. Its excellent climate makes it a great destination for tourists, so if you wish to rent your home out to tourists while away, you can do so as long as you want. Property management during rent is cost effective, you can find an affordable body corporate administration to take care of maintenance and every rental issue.
COLOMBIA
Colombia is a thriving country that offers access to affordable world class healthcare and low cost of living. Colombia is a bio-diverse country so finding a climate and environment that suits your taste is a possibility. If you love the swirling and cool movement of spring, then you’d love Medellin, a town in Colombia. It has a perfect spring-like weather all year round that leaves you feeling refreshed. Though it’s not the cheapest place in Colombia, It still has some areas that provide cheap rental properties and skilled property managers. For those that love the green lands, Cali is a place to experience the true gift of nature. It is surrounded by tall green trees dividing roads and serve as shades along the streets. Its residents are known to be welcoming and warm hearted. To easily adapt to living there, you’d need to learn Spanish or at least be willing to try.
ECUADOR
Ecuador provides a wide range of places to live with appropriate weather conditions. For example, you can have the cooling sea breeze from the Humboldt Current, the warm weather year round on the coast, or a more temperate climate in the Andes. If you’d love to live by the coast, Ecuador has some affordable and undeveloped beachside properties. Salinas is another example, it is a seaside town located in the far west of Ecuador with the most affordable real estate. You can buy a home in Salinas for as low as 45 000 euros.
Lastly, is the city of Loja. This is a safe city, and the temperate climate makes it a walkable one too. The local bus system and low-cost cabs make Loja an easy place to live without the expense of a car. Loja is not only attractive to the eyes and soul, living here is also easy on the wallet. It is an affordable city to live in. You can buy a house in an exclusive area of Loja for around 113,000 euros.
PANAMA
Panama is known to provide rental and agricultural opportunities and at the same time, reasonably low medical costs. Language barrier is quite limited as there’s quite a large English speaking population. The infrastructure is high quality with clean water, alongside great internet access. If you daydream about sunshine, tropical beaches, and welcoming locals, then Panama may be for you. It offers a variety of places with different climates, we have the beachside Coronado with its gleaming white sands and cool breeze.
ITALY
Italy is a beautiful country steeped in the arts, family, architecture, music and food. It has beautiful mountains surrounded by flying pigeons. They are mostly seen flying around buildings and artwork, so removing birds’ droppings from your car’s paint and windows may be an unavoidable situation living there! Several regions of Italy offer plenty affordable real estate, for example, in the island of Sardinia, you can buy a house for as low as 23,000 euros. Some of these houses are a bit old and may need some carpet fixing and other renovation work before you can live in them. So knowing how to repair damaged carpets may come in handy, together with some exterior house washing and roof treatment and you’ll be good to go.
Another place you can buy cheap houses is Abruzzo, it’s one of the recently discovered places in Italy surrounded with boasting hills and snow-capped mountains perfect for skiing in the winter. If you’re keen on living the quiet life, Abruzzo offers properties around 45,000 euros.
COSTA RICA
Costa Rica is an amazing place that offers several outdoor lifestyle options, from horseback riding to golfing and fishing. It also has favourable climates ranging from warm beach regions to cooler mountain towns that provide houses with affordable prices. For example, in central valley, an area in Costa Rica, you can get plenty of homes on offer for less than 1800,000 euros. Another town you can find houses with affordable prices is Maceio, it is a town with a long stretch of beach fronts surrounded by swaying palms that leave refreshing air. If you’re a lover of the beach and in need for a beachfront property, you can buy a large 3-bedroom apartment for less than 68,000 euros. Remember though that the language barrier might be a bit of a problem due to the low English speaking population.
FINAL THOUGHTS
As the world increasingly becomes a digital village and more opportunities open up for digital nomads and globetrotters, the previous limitations are no longer acceptable as the world shrinks in size due to technological advancement, and it is now possible to be a citizen of the world. Now the real question is – Where’s your next stop?