Interest rates and property prices are still low and it would seem a good time to become a property investor.
But Rotorua Rentals owner and Leading Property Managers of New Zealand director Richard Evans warns investors to avoid these 10 common mistakes.
1. Believing everything you are told
Do not rely on information from an agent about the rent you can expect to charge, how easy it will be to let and whether existing tenants plan to stay. Talk to the tenants, local independent property managers and other investors.
2. Doing the wrong research
Evans said statistics could lie if you did not research deeply or widely enough. For example a potential investor could look at rents in Pukehangi and count on getting $360 a week for a three-bedroom home. But Ford Block lies in the middle of that area and they might only realistically, be able to charge $180.
3. Taking advertised rents as market indicators
The amount a property is advertised for will not necessarily be what it will eventually be rented for. You also may not know whether prices include garaging, furnishings or services.
4. Not knowing what tenants want
This varies. What lets easily in one location may not work somewhere else. Talk to property managers who know the local market well and can tell you what type of property is in demand.
5. Failing to check existing tenancy agreements
If buying a tenanted property, your due diligence should include checking there is a tenancy agreement and the bond has been lodged.
6. Creating your own clauses in tenancy agreements
Standard tenancy agreements are available but, if you add in your own clauses, make sure they are legal.
For example, you cannot make a tenant commercially clean carpets on leaving - you can only require that the property is left "reasonably clean and tidy".
7. Taking tenants at face value
A presentable prospective tenant will not always be a good tenant. They may not even be the ones living there.
Evans said gangs often sent well dressed young people to rent properties on their behalf and, once they were in, it could be difficult to get them out.
Always get some form of identification and references and have a look at where they currently live.
8. Getting overly friendly
This can make it more difficult to deal with disputes - especially if you have made arrangements directly with the tenant your property manager does not know about.
9. Being too greedy
Rather than charging as much as you can, set rent slightly below the market value to retain stable tenants who look after your home because they do not feel as if they are being "gouged".
10. Not using a property manager
Professional property managers have experience, knowledge and systems not always available to individual investors. They understand tenancy law and poor tenants prefer to deal with private landlords because they know they will not get a look in with agencies that share information.
The Rotorua Chamber of Commerce hosted a Property Investment seminar at the Distinction Hotel on Wednesday. This is the first in a series of Saturday articles based on presentations at the seminar.