Property investment strategy
The first step in successful property investment is to establish a strategy, setting out how you will achieve your goals and the rules you're going to follow. You'll need to think about:
- What property market do I want to invest in?
- Who do I need to help me?
- What ownership structure will I use for my investment property(s)?
- How can I get the best return from my investment property(s)?
- What are my property investment goals?
The property market is made up of many smaller markets, defined by particular areas or types of property. You need to:
- Decide on your geographic area
- Identify potential properties
- Conduct a basic rental income return on investment analysis.
Once you’ve decided on an area to focus on, research the market and create a list of properties that are likely to meet your investment criteria. If you're looking in a city, your list may contain 30 or 40 potential investment properties. If you're looking in a small town you may only have five or six properties.
You can then narrow them down by doing a basic analysis to compare each property. To do this, you'll need to know:
- The purchase price of the property
- How much it will cost to manage and maintain the investment property
- How much rental income you’ll get (remember to factor in potential vacancies)
- How much your mortgage repayments will be (you can use our home loan repayment calculator to calculate this).
Your property investment team is one of your greatest assets as you grow your property portfolio.
Research your team carefully before you start investing in property to save time and money in the long run. You're the selector and coach - your aim is to select the best players who you trust and can work together to get the job done.
Your team will include permanent players and players you keep on the reserve bench for when they're needed.
The permanent players in your property investment team will include:
- Your ANZ home loan and insurance specialists
- Your accountant
- Your lawyer.
Your reserve bench might also contain:
- Real estate agents
- Registered valuers
- Property managers
The ownership structure you choose for your residential property investments can make a big difference. The best choice will depend on your own circumstances and goals. Things to consider include:
- Flexibility over time
- Simplicity – a complex ownership structure isn't always necessary
- The ability to introduce other people
- The growth of your property investment portfolio
- The ability to exit your property investment if you need/want to
- Your accountant and lawyer can help you to decide on the best structure for you.
To make money through investment property you need to buy wisely and choose a property with one or more of the following factors:
- It’s in a location with potential for improvement
- It provides a high yield
- It can be bought at a reduced price
- It has potential for improvements that increase its value.
The best way to increase your investment property's value (and your income) is to add features that tenants desire and are willing to pay a higher rent for - for example:
- A garage or carport
- An extra bedroom (by adding to the building, re-organising existing rooms or adding a sleepout),
- New carpets
- Security alarms
- Even just making the place clean and tidy can give you a price advantage over other rental properties.
Improvements to your investment property are best considered (and budgeted for) before you buy it. When considering improvements, make sure the extra cost will achieve a high return on your investment.
Goal-setting is as important in property investment as in any other aspect of life.
Questions to ask yourself include:
- Why are you investing in property? Is it to generate an income, is it to build wealth, is it a form of savings for retirement or is it a combination of all these?
- What is your investment timeframe? For example, are you investing to provide for your retirement in 20 years' time?
- What type of investment property will you buy to meet your goal – e.g. five two-bedroom flats, three three-bedroom houses or something else? (You’ll also need to think about what’s involved in managing different types of properties).
ANZ lending criteria, terms and conditions and fees apply to all loans.
A copy of the Reserve Bank Disclosure Statement published by ANZ Bank New Zealand Limited may be obtained on request from any ANZ branch.
This material is for information purposes only. Its content is intended to be of a general nature, does not take into account your financial situation or goals, and is not a personalised financial adviser service under the Financial Advisers Act 2008. It is recommended you seek advice from a financial adviser which takes into account your individual circumstances before you acquire a financial product. If you would like to speak to an ANZ Authorised Financial Adviser, please call 0800 269 296.
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