Are you looking to invest in property but not sure what it entails? Whether for capital gains, rental income, or both, there are many advantages to joining the housing market. In this article, we delve into the nitty gritty of property investment and everything you need to know to succeed.
Whether you have a house in mind or are at the beginning of your investment journey, read on for everything you need to know.
Benefits of investing in property
There are several reasons why some investments perform better than others. If you are looking for a reliable, long-term investment that generates steady income, a residential property may be right for you. Benefits of property investment:
- Owning your primary residence.
- A source of passive income.
- Yields long-term value.
- Offers versatility.
To help you decide, let’s explore each of these benefits in more detail:
1. Owning your own home
If you want to invest and also need somewhere to live, why not combine the two and buy a house? Instead of spending money on rent each week, you can pay off a mortgage over time and end up with a substantial asset.
Not only will you have more influence over your own home, but the value of the house will grow, building equity when you eventually choose to sell it. With the profits, you can either buy a second property or upgrade to your dream home.
2. Passive income from a rental property
Whether as a long-term rental or short-term accommodation, a second dwelling is an ideal opportunity to generate passive income. In fact, 90% of the world’s millionaires earned their wealth through real estate.
People will always need somewhere to live, so with an unoccupied house at your disposal, you can easily attract tenants to pay the rent. Just make sure you choose a property in a desirable location and with Healthy Home’s compliance. That way there should always be high demand, fewer vacant periods, and a steady rental yield.
Rental property management
When it comes to renting your secondary house out, there is a certain level of work to be done to maintain it. Property management includes:
- Finding suitable tenants
- Maintenance and repairs
- Resolving issues as they arise
- Financial management
- Managing the paperwork, including Healthy Homes
- Appraisals according to market value
You can do this work yourself, but if passive income is what you want, a professional property manager can manage it for you. You should also consult a registered financial professional before making any investment decisions.
3. The value of residential property
Property values are constantly changing, going up and down in waves. While it can be daunting to invest in, the nature of any stable asset is that prices boom, peak, fall, and then repeat the cycle.
While selling in a market dip won’t generate much profit, you can be confident that the value of a property will eventually rise again. If the housing market is in a moment of decline, don’t panic. While house prices are going down, they are often still higher than they were the previous year or two meaning you can usually still make a profit. On the other hand, these times are often the most strategic moments to buy because you can purchase a property for a low price and then sell it when the market inevitably booms again.
Since 2003, average New Zealand property values have risen by almost 300%, showing how owning a property for the long term has an impressive return on investment. For an up-to-date indication of New Zealand house prices, see the QV House Price Index.
4. A flexible investment
When it comes to such a major purchase, it’s wise to choose something versatile and adaptable. That way, as the market shifts and preferences change, you can still generate income. With residential property, there are several ways to generate income that may suit you. If you like consistent income with less upkeep, a long-term lease will likely be your preferred option.
However, if the house is in a high-demand location or has luxury features, you may benefit from listing it as short-term accommodation on sites like Airbnb. This also allows you to use the house yourself or let your friends and family use it when it isn’t booked out for paying guests.
Hiring a property manager or cleaner to take care of the house will allow you to enjoy the income with none of the work. This way, not only do you get the profit from selling the house at a later date, but you also generate income for the entire time you own it.
New Zealand property tax
Before you buy an investment property, consider the tax implications that comes with it – namely the Bright Line rule and the intention rule.
The Bright Line property rule
To encourage more new build houses, the government has updated the bright line property rule. This tax now applies to existing homes bought and sold within 10 years, and newly built houses bought and sold within 5 years. That means if you are looking for a second property, building a new house will be a wiser choice.
The intention rule
If you have an existing pattern of buying and selling properties for profit, you will likely be subject to the intention rule. This tax applies specifically to investors who have a regular pattern of resale. If you choose to build a house as a rental property, you may be exempt.
Building vs buying an investment property
When it comes to such a major investment, you need to be certain that the long-term payoff is worthwhile. That’s why building may be more economical than buying an existing home.
The key benefits of building a new house include:
- Guaranteed compliance with the latest Building Code standards.
- Healthy Homes compliance.
- Fewer tax implications.
- No need for renovations.
- Better energy efficiency.
- Flexibility to customise the layout and design.
One of the main advantages of building new is that modern houses meet minimum standards by default. This provides full peace of mind that your property will be a reliable, valuable investment for many years to come.
Affordable new build houses
If you want to build a house as an investment, you should take the time to consider which building method is most cost-effective, efficient, and convenient. This way you can spend less upfront while still making a profit in the long run.
With a prefab, you gain all the advantages of a brand-new build house with none of the hassles of on-site manufacturing. The majority of the build takes place in a controlled factory environment, meaning the whole project can take as little as a few weeks to complete.
Advantages of building a prefab include:
- Fewer delays.
- Low travel costs for tradespeople.
- Minimal disruption to the site.
- A faster construction timeline.
- Regular progress updates.
To learn more about our range of prefab houses and to find your perfect investment property, reach out to our friendly team today. We can discuss your options, share our range of house plans, and help you decide which type of property is right for you.
