21 May 2019
Invest with Success: 4 Tips For New Property Investors
Investing in property can transform into a profitable business that can benefit you and your family for generations to come. However, property investment isn’t a get-rich quick scheme. It takes persistence, patience and the drive to constantly seek out the best opportunity, as well as be aware of the risks.
Here we outline four things you should know before diving into this exciting industry.
1. Define Your Goals
At Lugtons we know that successful property investors have clear goals, and a plan to help them achieve these goals.
When defining your goals, you need to look at why you want to become a property investor. Do you want to rent out a property to supplement your income and eventually sell it for your retirement? Or perhaps you want to climb the property ladder to become a full-time investor?
Uncovering the ‘why’ helps you form a solid plan and budget to follow. Having this plan in place helps you make the right decisions, therefore reducing the risk of making any investment mistakes or going over budget.
2. Take Stock
Investing in property is obviously going to require capital investment. Therefore, you need to take stock of all your assets, as well as your income and expenses.
Speaking to an accountant is the best way to lay out your financial situation and opportunities. Choose an accountant who is experienced in investment property and understands the steps involved to help guide you in the right direction. You may also want to speak to a broker, who can determine how much you can borrow, as well as discuss the option of creating equity on your current home to jumpstart your property investment career.
These discussions help you identify how much you can invest, and a realistic budget to follow when it comes to choosing the right property.
3. Choose your property type
Now that you know your reason for becoming an investor, you need to choose which property type meets your goals and budget.
Property investment comes in many shapes and sizes. Here are three types new investors typically look at.
- Buy It, Fix It, Sell It
The buy, fix, sell model involves buying a property below the area’s median price, and adding value to the property through renovation. Try to find a property with potential, and ensure you stay within budget, only making changes that will add value.
We suggest speaking to a Lugtons salesperson before doing any renovations, as they can inform you about which upgrades add value, and whether they would be meaningful for the typical buyer for that type of property and suburb.
- Residential Rental Properties
Residential rental property investors purchase properties below the suburb’s median price. These properties may or may not need some renovation. Usually, adding value to rental properties at the beginning can lead to increased rental returns. The key is to find a suburb that is already in demand, or one that is up and coming. The sales team at Lugtons can help you identify great opportunities within the market to ensure you invest in a successful property and neighbourhood.
- Commercial Rental Properties
Commercial rental properties re a similar set-up to the residential rentals, however they typically require a larger investment at the start. As a commercial property owner, you can negotiate the term of lease, which usually spans years as well as the notice period your tenants need to give you. This reduces the risk of tenants leaving you in the lurch, costing you money while you try to find new renters. Another major benefit of commercial leasing is that the tenants are responsible for the maintenance and care of the building.
As most commercial buildings are built in thriving business areas, there is a high chance your building will increase in value. Try to find a commercial building in an area that is on the cusp of significant growth and is under the median price for that location. Keep in mind that major renovations for commercial buildings are typically more expensive than those of a residential property, however it is usually the tenant who is responsible for the decoration and equipment within the building.
You also need to be aware of the strict standards around Health & Safety for commercial buildings so try to find a commercial building that already meets those standards. That way you won’t end up spending too much time and money on renovations.
Our team can help you understand the Health & Safety requirements for commercial properties, negotiate lease terms and organise building inspectors to review potential properties before you make an investment.
4. Ask the Right Questions
With thousands of properties available on the New Zealand market, find the right fit for you can be a challenge. To help you sift through the options, you need to do your research and ask the right questions. Conducting research into the property and its location can be the difference between becoming a successful property investor, or not.
Ask the following questions:
- What is the estimated market value of the property?
- How much was it sold for to the previous owners, and when?
- What are similar properties in the suburb being sold or rent for?
- Have there been any changes in the initial advertised price since it was placed on the market?
- How long has the property been on the market for?
- What has been the area’s capital growth over the years?
Knowing these answers helps you determine whether the property is worth the investment or not. The team at Lugtons can help you answer these questions, to ensure you are fully informed before making an offer.
Property investment is an exciting game. Arm yourself with a clear understanding of your budget and goals, to keep you on the right track. Eliminate the risk of making a poor investment by doing your research, and consulting with experienced people, who such as property lawyers, accountants and property salespeople.
Lugtons always has exciting property investments available for new investors. Check out our current listings for your next investment property venture!