What makes a good investment property?
2494POSTED:
GRA Blogs
Articles by Mark Honeybone - Guest Contributor
Last month I received some great questions in my 'Ask Mark' series on Property Ventures’ Facebook page (propertyventuresnz). One of them was a very important "back to basics" question: What factors do you take into account to consider a property to be good for investment?
It is a great question, and even though I have already briefly answered it on the Facebook page, it is worth writing a more detailed blog on the topic. The answer falls into the two categories below.
1. Location
Location, location, location! We hear it all the time, but what does it mean?
• Infrastructure - What is going on in this location? What is the local council doing? Is the government investing money and resources into the area? If your answer is yes to these questions, it should be a safe bet that property in this area will show capital growth in the future.• Public transport - Is the property close to bus stops, train stations and other public transport systems?
• Schools - This is important, especially if there are schools nearby which are considered 'sought after'. A home's price can be several hundred thousand dollars lower if the property is near a good school, but not zoned for it and instead zoned for a “less desirable” school zone.
• Development potential - The more you can do to the property (renovate, add rooms, or subdivide), the more your investment will be worth at a later time and the more rent you will be able to achieve.
• Rental demand - If you are planning to rent this property, you will need to check and understand the demand for rentals in the area. I suggest talking to several property managers, not just one.
2. Obstacles that may affect selling or renting a property out in the future
If you are looking to purchase a property to hold it long term, thinking about when you'll be selling it will most likely be the last thing on your mind. But let me be clear about this one! Whether you buy to renovate, keep it long term for capital gains or to get a good rental return, you should always be aware of the obstacles that may affect the property's price in the future, as well as whether good tenants will want to rent it.
• Train lines near or at the back of the property - potential noise or danger for children.
• Motorways near or at the back of the property - same as the above.
• Is there a large apartment building or a Housing NZ complex being built next door or on the same road? Will it affect the price of your property?
• Bad reputation - research to ensure that the street hasn't been in the news for the wrong reasons. Visit Mr Google.
• Is there an airport nearby? The noise can put buyers and renters off. Remember, the airport would have been there for a long time, so it's likely that it won't be going anywhere.
• Power lines running over or close to the property – a potential buyer or tenant will normally look at another property unless they are price driven.
All of these points can affect the price and number of potential buyers or tenants in the future, which in turn should affect your buying decision in the first place. It will not matter how well you renovate or how many additional rooms you put in it; the above factors may still affect the price negatively.
I'm not saying never buy a property with the above, but be smart about what you're paying for it. Also, be aware that you will have a more limited pool of buyers or tenants than you normally would. It's like monolithic clad buildings; they will also sell, and there will be buyers, but a limited number of them. Fewer buyers equal less competition, which equals less price. It's just the way it is.
Guest Contributor
Invited guest writer
© Gilligan Rowe & Associates LP
Did you like this article? Subscribe to our newsletter to receive tips, updates and useful information to help you protect your assets and grow your net worth. We're expert accountants providing expert advice to clients in NZ and around the world.
Did you like this article? Subscribe to our newsletter to receive tips, updates and useful information to help you protect your assets and grow your net worth. We're expert accountants providing expert advice to clients in NZ and around the world.
Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
Comments
Testimonials
Hi Salesh, I just wanted to send you an email on behalf of GRA to say how fantastic we have found your company to date. As you know, Ben and I joined GRA a couple of months ago and have just found you so amazingly helpful in getting our new property set up correctly and sorted out. We have what I would consider a rather complicated structure as a result and it’s a fantastic feeling to know that we are getting everything done in the best way possible. We have just had approval to put a minor dwelling on the property which will make a massive difference in terms of cash flow and obviously value, something we would never have even thought of without GRA and which we are very excited about. During the buying process we attended a seminar with Matthew and from the outset thought he was fab. We therein signed up for property school and found this nothing short of fantastic. The content was relevant, up to date and comprehensive, but more importantly it was taught in a way that we could actually understand and really get value out of. I wanted to mention also, that everybody GRA have recommended to us has been just so efficient and absolute masters at what they do. A wonderful network of people that we feel very lucky to now be able to call on. From Kris Pederson and Bryan Rist who put our mortgage together to the insurance guys they then referred us to, I’m super impressed. Within GRA, Ellery has probably turned things around for us faster than I’ve ever known before, something which we appreciated so very much when it came to crunch time. She’s always a pleasure to deal with and again, we’re stoked. We’ve just settled on the property today and are about to go and get the keys. I’m pretty pumped and hence this email is probably rather excitable. So, a massive thank you to you Salesh, the partners for such a fabulous 6 weeks at property school and everyone at GRA for their help. May this be the start of our property empire. Thanks again, - A & B - July 2015
Gilligan Rowe and Associates is a chartered accounting firm specialising in property, asset planning, legal structures, taxation and compliance.
We help new, small and medium property investors become long-term successful investors through our education programmes and property portfolio planning advice. With our deep knowledge and experience, we have assisted hundreds of clients build wealth through property investment.
Learn More
Free Resources, Tools & Downloads
