Property statistics are clearly showing the start of next property cycle, with particular hot spots in Auckland and Christchurch. This is prompting investors who have been sitting on the sidelines to dust off their calculators and take a good look at the opportunities in the market. Low interest rates are one of the driving forces, along with net migration, the Christchurch rebuild, and the lack of property stock due to low levels of construction activity. The danger is that novice investors, caught up in the frenzy of an up-cycle, will make poor investment decisions.
Success in property investment comes from in-depth research and an understanding of what makes a good investment. The knowledge required takes time to acquire. Most seasoned investors will tell you they are still learning! If you are keen to have a go at property investing, here are some basic guidelines:
- Read several good books on property investment
- Attend property investment seminars
- Join your local branch of the New Zealand Property Investors’ Federation
- Talk to experienced property investors
- Do your research to determine the best geographic area to buy in, based on population growth, economic growth, trends in property prices and rents, etc
- Narrow down your choice to specific suburbs, based on demand for rental properties, proximity to conveniences such as transport, shops, schools etc
- Decide what kind of property you want to buy – bungalow, apartment, unit, home and income etc
- Research specific properties based on the rental yield (annual rent divided by purchase price), projected capital gain, projected cash flow (including repairs and maintenance) and opportunities to increase the value by undertaking improvements.
In the current low interest rate environment, property investment with a combination of rental income and capital gain is looking increasingly attractive.