Residential Property Investment
When it comes to residential property investment in New Zealand, due to the favorable tax regime It has been a popular investment option for people who have been trying to build wealth. On top of that houses in New Zealand have seen strong growth in price stimulated by very low-interest rates and a limited housing supply.
Check out what you need to know when it comes to residential property investment in New Zealand. Residential Property 101
Check out the main types of residential property investment strategies in New Zealand. Residential property strategies
Find out where is the some of the best locations to invest in property in 2022. Best Residential Property Locations
Find out the main factors that affect residential property investment in New Zealand. Factors Affecting Residential Property Investment In New Zealand
Find out why you should invest in residential property in New Zealand in 2022. Why Invest In Residential Property in NZ
Understanding the property investment numbers is crucial when it comes to residential property. Find out everything you need to know about numbers. Understanding Residential Property Numbers
Residential Property Investing 101
Choosing a strategy
Choosing the proper location
Why invest in residential properties?
Understanding the numbers
Taking the plunge
Residential Property Investment strategy
Choosing a proper strategy before making an investment is the most important factor because it is going to decide how successful the investment is going to be. Usually, there are two strategies
- Buy and hold
- Buy and sell
Buy and hold
The conventional strategy of property investors has been to buy and hold on to the residential property for the long term and most of the time the property owners renovate the property and rent it out, in this way the investor is making money in two ways at the same time, they are earning cash as rent and also the value of the property is increasing every year, this is the strategy of investing used by the large section of investors. The buy and hold strategy however has some disadvantages as well, the primary disadvantage is your money gets stuck so you just have to wait to get back your money until you sell it.
Buy and sell
On the other hand, the buy and sell strategy is more popular among people of New Zealand because you just need to renovate the house and find a suitable buyer, you can potentially take a good chunk of cash home using this strategy in a very short period of time that is the reason this strategy is most common among New Zealanders
The buy and sell method may be more popular but it is easy to mess up, for example, the renovation of the house which is needed to sell the house can easily go over budget if the person is not experienced and may incur a loss. Another thing is that renovation projects can be very stressful because without the investor putting in the work himself, the project is not going to be profitable. Since the investor would be doing most of the renovation himself, the investor must buy that property in the nearby area otherwise renovating the house won’t be possible if the property is far away.
On top of everything, the buy and sell strategy is just a one-time profit, on the other hand buying the property and keeping it not only gives the investor rent money every month but the value of the property also increases significantly over time. Even when most of the new Zealanders go for the quick flip, buy and hold strategy is mostly advised because of benefits like rental income, year on year growth, and huge capital gains, these are the various factors among others why the buy and hold method is suggested by experts.
Choosing the proper location For Residential Investment
Choosing a good location is of great significance because it is the demand in any location which is going to help the investor get a quick flip or rent out the property, ideal place would be a place where there are a bunch of immigrants and students.
Auckland, Wellington, and Christchurch are the places where the most influx of New Zealand migrants has been noticed that’s why the most number of rental markets are active in these cities so accordingly the investor must do proper research before making the investment and also keep in mind what kind of return the investor is seeking because rental locations are completely different from locations where people would buy the property.
Factors that influences Residential Property
There are several factors that have an effect on the rental markets, such as the number of migrants in an area, If the migrants are in large numbers then the rent will be higher, and vice-versa.
Interest Rates : Another factor is changes in interest rates, the rent charged by the investor will be fixed however if the investor hasn’t chosen a fixed-interest rate mortgage his profitability will be going up and down as well. It has also been noticed through the past trends that when a new area is being developed the prices of the property in that area remains low initially, however when that area gets developed with supermarkets and other facilities, the residential property in that area skyrocket quickly, thus it can be advised to invest in those residential properties in the initial stage.
So the investors who are interested in making more money should always look for the properties that are in the beginning stages of development.
Why invest in residential properties?
The most important reasons investors invest in residential properties are that residential properties investments are considered one of the safest investment methods that have the potential to make the investor rich.
The most common method of building wealth is borrowing money to buy the house and have the tenants pay the interest and secure the capital gain.
For example : if you buy a house for $100,000 using $10,000 of your own money and $90,000 of borrowed money and then after some time the value of the house increases to $130,000, then the investor’s initial investment of $10,000 will have grown to a value of $40,000 an extremely attractive gain. This gain gets much more attractive because it is non-taxable in New Zealand
The great price boom of houses is still continuing in New Zealand which is stimulated by extremely low-interest rates, this is one of the primary reasons why investors prefer to invest in residential properties. The most expensive housing in New Zealand as of 2021 data is in Auckland followed by wellington, Bay of plenty, and Tasman. Even the recent pandemic didn’t affect the prices of residential properties.
The most affordable housing in New Zealand can be found on the West coast & Southland. New Zealand saw an amazing price rise in residential properties of 114% even if you adjust it for inflation it still comes at 82.5% from 2001 to 2007. Then after a brief pause, a considerable price rise in residential properties was again noticed between 2012-2021, for a country that has such a small population this growth is amazing.
Understanding the numbers
Like other asset classes and instruments, investing in Silver can come up with some risks. Lets look at some of the man risks associated with silver investment in New Zealand.
Before taking any decision of making an investment having an understanding of numbers is very important because the investor’s primary goal is to make a profit so not having a proper understanding of numbers can turn the profit-making venture into a loss-making venture. For making an investment securing the funds is the most important part, there are two types of mortgages which is used to get the loan
Principal and interest mortgage
This is the type of loan which is taken by people to buy their own homes, Each payment that is made to the bank consists of the interest payment as well as the principal amount
This type of loan is commonly used for investing in property. In this type of loan, only interest is paid every month and not the principal amount.
This type of loan raises a very important question.
If you always got a mortgage then how are you ever going to make money from the property?
If you are planning to make the investment for the long term, this strategy is very useful for example if you purchased a property for $100,000 and after 5 years the price of the house increased around 50% over that period, you will still have made significant capital gain even you still have the mortgage. This can also be called building wealth without paying the debt.
Start Investing In Residential Property
At this point you know almost everything about investing in residential properties but you are somehow still procrastinating, so it’s time to keep all the negative thoughts aside and take the plunge.
Most people keep planning about investing in residential property but they never do, so it is high time you stop procrastinating and invest in the residential property. People who invest the money in residential properties for the long term end up making 5X to 10X capital gains from their property, so if you haven’t thought of making an investment in any other sector because you are hesitant or nervous that you may lose your money then this is the safest and traditional investment method to not only secure your investments but you also secure returns with the investment in residential properties.
Final thoughts on investing in residential properties
A growing economy, low-interest loans, great returns, tax benefits, rental yields, are some of the factors among many more that should motivate you to invest in residential properties in New Zealand because with investments in residential properties there is an almost negligible risk especially if you are planning to invest for the long term and it is one sector that has the potential to make you wealthy because when the economy booms the prices of the properties soar to the skies in a very short period of time.