Buying a Rental Property
Many New Zealanders buy a second home as a rental investment. For your investment to have the best chance of being successful you need to do your research first. Here are some things to consider.
Good tenants
Tenants are possibly the most important aspect of owning a rental property. Consider buying a property that will attract good tenants. Choose a size and location that would suit most people who live in the area.
Achievable rental income
Be realistic about the rental income. You can get a rental appraisal by a MREINZ qualified agent but remember this is only an appraisal - the actual rental will be the amount you negotiate with the tenant. If you use a letting agent to manage the property make sure you check their management fees first. The rental income should cover your loan repayments on the property after allowing about 25% for rates, insurance and maintenance.
Loan servicing
If the property is not tenanted for a while you'll need to be able to service the loan from other income sources. If the real estate market gets the speed wobbles your rental income may decrease and you'll need to cover the surplus. It's a good idea to build this possible scenario into your budget.
Whether your investment is short or long term may affect your decisions on types of interest rates and repayment options.
