Buying an investment property in Tauranga? There is a checklist, say local real estate agents. The aim of the investment game is to make some sort of return on your rental property. But there are a few things to consider when investing in property such as the type of property and its location. Property reporter Zoe Hunter breaks down the doors of the city's suburbs where you will get the best bang for your rental buck. Real estate experts also share their take on what to look for when investing in Tauranga's property market.
The Tauranga suburbs of Parkvale and Poike are where property investors will get the best rental return for their buck, according to new figures.
And the worst returns? Tauranga Central and Mount Maunganui.
Data by analysts OneRoof/Valocity showed median property values in Parkvale and Poike were among the city's cheapest at $450,000 and $452,500, with estimated weekly rents of $473 and $476.
This gave investors a 5 per cent return of $22,704 in Parkvale and $22,848 in Poike based on 48 weeks' rental income and leaving four weeks' aside as a buffer for expenses.
For those wanting to buy in Tauranga Central, median property values were estimated at $780,000 with a weekly rent of $583. That left investors with a 3.59 per cent return of $27,984.
Median property values in the Mount were $740,000 with a weekly rent of $567 and a 3.68 per cent rental return of $27,216.
OneRoof editor Owen Vaughan said the boom in Tauranga's property prices had squeezed rental yields.
Vaughan said people looking to invest now will be in a more challenging position than those who entered the property market before the boom.
"For those who managed to buy before the boom, the rental yields on those properties are through the roof and they will find it hard to sell," he said.
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The share of investors in the Tauranga market had dropped considerably in the past few years, Vaughan said.
"People are looking to places like Rotorua or further afield to get better rental returns."
Simon Anderson, chief executive of Realty Group which operates Eves and Bayleys, said the data reflected the value of properties in those areas.
Anderson said there was a higher percentage of rentals in areas like Parkvale and Poike, which were attractive to young families because of the accessibility to schools and shops.
The higher returns reflected the desirability of those locations for longer-term property holders, Anderson said.
"People who live in the Mount, naturally their homes are worth more due to their location," he said.
Anton Jones, general manager of Tremains Bay of Plenty and Waikato, said someone looking to buy in the more affordable areas needed to be mindful of the new Healthy Homes legislation.
"Certainly they are a lot better value than some of the other areas, but they have got older homes so you need to make sure they are up to the new standards," he said.
Tauranga Rentals owner Dan Lusby said there was still a demand for rental property, particularly in the cheaper suburbs.
Lusby said houses were a lot older in the cheaper suburbs but maintenance costs were a lot higher.
"People have to take into account those extra costs. They are cheaper to buy but we always find the newer houses are cheaper to run in the long run."
Speaking on behalf of the Tauranga Property Investors Association committee, Phil Waylen said there were positives in investing in Tauranga's market despite growing prices.
An increasing employment base, the Port of Tauranga, interest from large employers, a growing horticulture industry, and a new university campus providing accommodation demand put the city on the map as a stable place to invest for long-term capital gains and steady yields, Waylen said.
He said long-term homeowners, who have either paid off a chunk of their mortgage or the value of their property had increased and their mortgage remained the same, could choose to leverage that equity to invest in rental property.
Waylen said the main banks required a minimum deposit of 30 per cent when buying an existing rental investment property.
However, Waylen said the potential investor must be able to afford to repay the extra loan repayments and costs associated with owning rental property.
"So, hard work and paying down as much of the mortgage on your first home is vital in the average market when properties aren't increasing in value as fast as they have been," he said.