Buying investment properties to rent to tenants and buying a home can be very different processes. Here are four steps to ensure that your investment property makes good business sense.
Make sure an investment property is the right form of investment to you. There are many aspects of property investment that make it so appealing to New Zealanders, but it’s not the only way. Can you afford it? Would it be better to invest in something else? Stocks, or even a savings account, can be better for certain potential investors.
If buying a rental property suits you and your family, it’s time to think of what kind of property is right for you. This depends on many things. If you are considering ever moving into the house after renting it out, it’s important to make sure that it suits your taste. If not, then look at what most renters in your area are looking for, tailoring the cost to your own budget. Renovating can be a good way to create value, but it is time-consuming and can be expensive. This is a decision that needs to be made before you start looking for properties, especially if the house needs extensive work. You may also wish to have your rental property nearby if you are planning to manage it yourself. These are all factors that must be considered. Try to be objective – it’s not your home, it’s an investment.
A mission statement might sound odd when looking to buy a rental property, but if you are to treat renting like a business, it’s a good idea to plan it like a business. A mission statement can be as long or short as you want. It’s a good way to lay out the expectations you expressed in the “refine” stage in a clear format. These expectations can be anything from location, to cost, to how much return you want or need to keep up with mortgage payments. You can only plan so much, and the property you buy and the financial situation it leaves you it could be very different from what you first pictured, but this gives you a place to start.
You don’t need to buy the first property you see, and if you can’t find anything that fits your needs you might not buy at all, but ideally at this stage you will find the property that’s perfect for you. Be cautious and get a property valuation and a rental appraisal.
If everything checks out, congratulations! You are now a property investor. The journey from here is long and not without challenges but, hopefully, very rewarding.
John Kenel, Assured