attractions and pitfalls of property investment
Dropping property prices, affordable interest rates and generally stable rental incomes can make property investment an attractive proposition. Investing in property is different from buying your own home. It is guided more by the financial principles of return than lifestyle factors and emotions that are a part of purchasing your own home.
What makes a good investment property?
A good investment property is one that is easy to rent and provides a positive return on your investment. Location is always an important factor with good investments likely to be in areas close to universities, hospitals and city centres with good access to public transport and shops. Renters look for properties that are easy to look after, with good lighting and ventilation and well maintained premises.
Typically the purchase price for an investment property is for the most part determined on an objective or logical basis. The risk and returns are weighed up and the price paid will be dispassionately calculated, driven to a large extent by the expected income generated from the property – both rental income and future capital gains.
Setting yourself goals for yield and capital gains will provide you with the basic guidelines for successful investing. It is therefore critical that you do the research and identify suburbs that are likely to provide the highest yield or capital gains. For example properties in cheaper areas often provide a better return on investment because you can often charge more rent as a proportion of the purchase price.
Investing in property is like a business
Property investment is not a passive income stream. You need to run your investment properties like a business. Management is an aspect of property investment that new investors commonly forget or initially place less emphasis on when weighing up the cost-benefits of an investment. Residential investment can require a high level of management, including managing all property expenses, maintenance, and tenants.
Outgoings are expenses that ownership of a property attracts. They can comprise rates, insurance, repairs and maintenance, body corporate fees, and other expenses. These expenses should ideally be covered by the rental income received from the tenant.
You can of course pay someone to manage all of this for you but this again comes off the bottom line.
Property market intelligence gives you the investor’s edge
A fundamental component in making a successful property investment is to comprehensively examine purchase prices, current and potential rents, lease structure, and likely property expenses that will be incurred during ownership. These crucial aspects of property investment are relevant at any stage in the market cycle. An investor must weigh up the different characteristics of each property type and only invest if it meets their own performance criteria.
In property investment, to be informed is to keep ahead. QV provides you with a range of information to help you make intelligent decisions based on your goals. You can keep informed about the market, improve the quality of your prospecting and manage your portfolio to maximise your returns.
In addition to qv.co.nz, we also bring you qvinsider.co.nz a web site designed for investors and iadvise.co.nz designed for professional investors and property traders. You can now pick the right solution that effectively meets your needs.