5 Fundamental Principles for Property Investment – July 2016

by Tracey Sparrow

The opportunity to become a Property Investor has become more appealing with recent declining interest rates increasing the appetite to borrow funds to purchase an investment property.

Whether you are looking to hold one, ten or fifty properties in your portfolio, your financial success can be guided by five fundamental principles.  Within this article we will take a look at these Property Investor “basics” which may assist guide your success as a Property Investor.  We know your time is valuable so we have summarised these into long and short versions – if you are already a client of Irelands Property Management (Irelands), you will have plenty of time to read the long version knowing your investment property is in good hands.

The Long Version

1.      Education

You are in the business of making money through your investment. Like any good business person, you need to understand your market. Take the time to learn as much as you can about the property industry and financial implications of owning an investment property.  We recommend educating yourself in the following areas:

  • Understand the current property market.  Look to access industry related blogs (check out our industry blogs), read relevant industry articles and/or subscribe to NZ Property Investor Magazine for monthly insights into the rental market.
  • Landlord requirements under the Residential Tenancies Act 1986, e.g. refer to our recent article “Changes confirmed for Insulation and Smoke Alarms”  on the recent legislative changes which now affect Landlords.
  • Identify the benefits available to you as a Landlord.  As an example, Irelands PM recommend the services of the Community Energy Action Charitable Trust (CEA) who are Insulation Assessment specialists to our Owners.  The CEA also have the knowledge and understanding of the various Government subsidies, including excellent discounts, available to Tenants who hold community services cards and are over the age of 65.   Property Owners/Landlords can take advantage of these subsidies/discounts when installing insulation.   This means the associated costs are reduced if it is necessary to complete work to meet the proposed minimum standards required under the Residential Tenancies Act 1986.
  • Gain knowledge of tax deductions which are available to you as a Landlord.  The most common rental property expenses are:
    • Property rates – land and water
    • Property insurance
    • Mortgage interest
    • Property management fees
    • Professional fees
    • Repairs & maintenance on the property under $500.
    • The other main deduction you may receive is depreciation. Any other expenses relating to the property can be deducted from the income.

By educating yourself, you will be clear on potential costs and profits associated with your property and ensure you understand the financial implications of investing in a rental property.

If in doubt seek advice from Industry Professionals or Consultants. They are more than willing to help.  This leads into point #2 – surround yourself with Experts!

2.      Surround Yourself With Experts

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Whilst this may feel like you are spending unnecessary money, it is vital to surround yourself with the expertise necessary to ensure your investment is successful and to achieve your financial goals. When considering investing in residential property, look to the following experts for assistance:

  • A Property Management Company who is dedicated to the ongoing management of rental properties – saving you time, money and hassle.  The team at Irelands would be happy to help by providing a free “no obligation” rental appraisal or even if you would just like to meet for an informal chat to discuss what is happening in the current rental market.
  • An Accountant who specialises in rental properties.  They will help minimise stress and worry when it comes to your monthly and end-of year accounting obligations.
    Irelands can recommend the services of DJCA Accountants who offer a “Sidekick4rentals” accounting package specifically designed for those with investment properties.  Book a time today or complete their online enquiry form and they will be in contact within 24 hours.
  • There are a number of companies who can work with you to unlock the equity in your own home and assist design a complete residential investment package.  They offer a total financial solution right from completing a full property investment analysis based on your personal circumstances and financial position, to the selection and purchase of a (brand new) property, management of the building process to liaising with Property Managers once the property is ready to market to prospective tenants. Irelands can recommend the services of Strategic Property Concepts Ltd if you are interested in this approach.

For a small investment in a team of specialists, you can minimise potential risks to you and your property, as well as look to offset the associated costs as tax-deductible expenses. The support and guidance received should leave you feeling confident about your decision to purchase an investment property.

3.      Mindset – I’m Running A Business

Your success as a property investor can solely relate to one thing – your mindset.  You need to consider your property and the associated property investor decisions as a business.  It has to be about dollars and cents, due diligence and educated decision-making.  This will include accessing knowledge from those employed in point #2, but involves strategic thinking, planning and a future orientation (rather than short-term gain). Leave the emotions at the door and think of your property as a resource or asset – not ‘your’ house or home.

Just as you need to view your property as an investment, you also need to be able to recognise that your tenants are part of a business arrangement.  Utilising the services of a property management company like Irelands PM, ensures that communications with your tenant remain professional and minimise any issues that may arise from becoming too friendly with your tenants or when relations with tenants sour – we take care of all that for you!

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4.      Put DIY On The Shelf

Another change in mindset required when considering investing in a rental property, is to forget the Kiwi DIY attitude when it comes to property management. Some property investors think that they will have the time, skills and ability to manage their own properties.  Unfortunately they underestimate the actual effort required.  Save yourself the trouble of attempting to let, check references, collecting rent, managing repairs & maintenance and many other tasks by employing the services of a property management company like Irelands, who have the industry knowledge, professional skills and access to on-call, competitively priced, professional tradespeople.

5.      DIY (Maintenance)

Always keep maintenance at the forefront of your thinking.  Although you may see this as a (un)necessary evil, by maintaining your investment, you are adding years to its’ productivity and proving to your tenant that it is worth looking after.  Regular maintenance activities can minimise potentially expensive issues in the future.  Refer to a recent article on Winter Maintenance which Irelands remind our Owners to ensure they are considering what is best for their property – Is Your Investment Ready for Winter?

If you have the ability to complete maintenance activities by yourself, it is a great way to minimise expenditure on maintenance, however a word of warning – use professionals when the situation dictates.  For example, anything to do with electrical work needs to be undertaken by a qualified Electrician.

A strong maintenance strategy is great for attracting good long-term tenants, higher rental returns, and does not necessarily have to cost you an arm and a leg.  The team at Irelands are committed to ensuring our Owners have access to competitively priced, professional tradespeople when the need arises.

The Short Version

Successful property investors are first and foremost business people. They view their property and tenants as part of everyday business and every action is strategically thought out and a step further into the future or helping with their bottom line.

Simply educate yourself, stay abreast of your environment and surround yourself with the experts who can offer professional advice and support needed to ensure your financial success and long term goals are reached.

Contact Irelands Property Management to take advantage of their expert knowledge and property management services.  Remember we offer a free “no obligation” rental appraisal and are happy to impart our expert knowledge to assist you enjoy financial success through investing in a rental property.

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5 Fundamental Principles for Property Investment – July 2016