How do you buy a rental investment property that will give you a higher return?
Investors have benefited during the past two years or so, with falling prices, fewer buyers and urgent vendors. Any market can be cruel and kind at the same time.
Deciding what sort of rent will be achieved is not an exact science, despite what many people might think.
Comparing your property with others renting in the immediate area gives a good indication, but several factors affect prices.
Bedroom numbers - obviously the more bedrooms, the more people.
Living areas - especially for families who need extra space for kids.
Bathrooms - the extra bathroom is now seen as almost essential to attract the best tenant.
Garaging and storage - especially for weather protection for cars, bikes, garden tools, lawn mowers and firewood.
Fencing - security to keep little kids safe and outsiders outside.
Heating - any property without heating is far less likely to attract a tenant through the Rotorua winter.
Location - yes, this is the big one, especially for out of town arrivals who seek advice from friends and employers about where NOT to live, and we do have a crime reputation here which is very sad.
Presentation - another big issue as poor presentation is likely to attract tenants with lower standards and reduced ability to pay rent regularly.
To new investors seeking advice from property managers, we ask some questions:
Would you or your children be okay living in this house?
What happens if the rent you are expecting is wildly optimistic?
Have you taken out insurance for malicious damage?
Do you know what you are buying? A recent buyer found out - after the sale - the tenant owned the fencing and garden shed and was taking them. The sales agent failed to let the buyer know.
Have you had specialist reports for things like wiring and plumbing? Quite often a buyer will face immediate costs because "everything looked fine".
Have you spoken with the tenant (out of earshot of the seller, of course) about any problems with the house?
New Zealanders' love affair with property investment remains solid, but with increasing volatility in the market, investors need to be less trusting and more analytical in their decision-making.
Richard Evans, executive director of Leading Property Managers of New Zealand and member of the Real Estate Institute property management group