In my search for information on the net I came across a great article about why invest in property. I was writing my own article however I was reminded as I read this one of the great saying that I think Winston Churchill coined, “often what you want to say has already been said so why make up something new when what has already been said is probably better than what you can write yourself” (that’s not the actual saying but that’s the general idea).
so the following article has some information and a table from the Real Estate Institue and some bits from Crockers. I thank them both in advance.
I will make commentary through the article about my opinion on the comments.
Investing in property offers two major benefits: capital growth and tax advantages.
(terry: these two things are the most important concepts in creating wealth from any investment class)
In the early stages, rental incomes often don’t exceed your outgoings on a property - particularly the costs of servicing the loan. But as the property increases in value, rents tend to rise faster than costs and the property generates net income.
(terry: this depends on how much you have borrowed of course, if you have made a 50% deposit then the property will probably be cash flow positive from day 1)
What’s more, costs can be claimed against your taxable income.
(terry: this is often referred to as the governments way of encouraging you to invest in Real Estate)
When the time comes to sell (assuming you’re a property investor, not a property trader), current tax laws means you don’t pay capital gains tax. So the money you make from the sale is tax free.
(terry:you have to be very careful here, there is no set definition that determines if you are a property investor or property trader, the general rule of thumb is that you have held onto the property for 10 years of more, this is slightly misleading because it is really all about the intent of the purchase)
Many people are also attracted to property because it tends to be less volatile than shares. However, we don’t recommend property to the exclusion of other investments. A strong portfolio is a diversified one: with investments spread across different asset classes, including property, shares and cash.
(terry: when you work in the property market like I do you will actually realise that the property market is just as volatile however because a valuation on your property is not ordered everyday you do not actually get to see this volatility)
It’s also important to recognise that no investment is risk free. Many people have become wealthy through property investment, but it’s also possible to lose money. Your best protection is research (and more research), experience, and good advice from a business like Hot Property Investments.
How do I get started?
Talk to us. We’re happy to talk property any time, with anyone!
Do some research. There are many excellent books and magazines on property investment. The cost is peanuts compared to what you’ll spend on your first investment property.
Start small. The most profitable properties aren’t always the big, flash ones.
Start early. Buying a small apartment to rent out can be a good way to build a big enough nest egg so you can eventually buy your own place.
(terry: this is great advice, people often say I couldn’t live in that however they forget they also don’t live in their term deposit or their share portfolio, property investment should be viewed like any other form of investment)
Things to look for in an investment property
The two keys to a good investment property are appeal and low ‘running’ costs. Appeal is a subjective thing, but experience shows that the following attributes always make a property easier to tenant:
- Outdoor living. Even a small private area - a courtyard, deck or terrace - adds immensely to a property’s appeal.
- Good sized bedrooms. At least two double bedrooms is preferable, even for most singles or couples-only.
- Good functional kitchen and bathrooms.
- Neutral decor. While not everyone loves neutrals, neither do many people hate them. Bright colours, on the other hand, divide people and can be a reason not to choose to rent a property.
- Location. Of course!
- Garaging. Lock up garaging is best. Then non-lock up, then a car port. Failing that, don’t settle for less than off street parking unless other factors make the property special.
- Dishwasher. Not essential, but a big plus.
- Low maintenance, small section. ItÂ’s not just good for you, it’s also a signal to tenants that the property will probably remain in good shape.
- Sunny aspect.
- Security features including fencing.
Things to look for in an apartment investment
- Balcony with pleasant outlook
- Good sized bedrooms. At least two double bedrooms is preferable, even for most singles or couples-only.
- Good functional kitchen and bathrooms
- Neutral decor. While not everyone loves neutrals, neither do many people hate them. Bright colours, on the other hand, divide people and can be a reason not to choose to rent a property.
- Location. Of course!
- Garaging - lock up is best. At a minimum there should be off street parking available.
- Dishwasher. More likely to be expected in an apartment than a house.
- Low maintenance.
- Plenty of natural light and a sunny aspect.
- Quality on-site management for larger blocks
What’s capital growth?
This is the money you make as the value of your property grows. Auckland property has enjoyed various boom periods that have seen many home owners increase their wealth considerably. While there’s no guarantee your property will gain in value, historically, Auckland property has experienced steady growth, and there are no signs of that changing.
So once again thank you to the Real Estate Institute and to Crockers for the article.
Pretty soon you we will also be providing property management services so keep an eye out for when we release the service.