What makes a good investment property?

Posted by Auckland Property Management Ltd on October 1, 2020 | News, Property Management, Video Blog

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Auckland Property Management Business Development Manager Toni Heath, outlines seven key areas to look at when deciding what makes a good investment property.

We often have investors, whether it be their first investment property or they’re increasing their current investment portfolio, approach us for advice on whether a property would be a good investment opportunity.

We consider the following key factors (which will affect potential rent income) when assessing an investment property:

 

Due Diligence

Due diligence is an investigation of a matter, usually undertaken before signing a contract. In this case, it’s investigating a property before purchasing it. As part of your due diligence, there are some formal reports you can purchase, as well as some informal enquiries you can make.  This should be undertaken with a licensed salesperson.

We can assist you with matters relating to the suitability of the property as a rental, including an independent rent appraisal to give you a good indication of current rent expectations, market demands and conditions. We do suggest that the investor have this completed prior to purchase of the property to ensure its suitability and to understand its potential income.

This rent appraisal will include a comparison of similar properties and current vacancy rates.

 

Location

The location of the investment property is paramount in ensuring that you receive a good number of prospective tenant enquiries. When considering location take into account distance to public transportation routes, local recreational and shopping facilities, number of new developments / infrastructure upgrades as well as local schools (noting some school zones are more sought after than others, such as the Auckland Double Grammar zone).

 

Property Condition

The condition of the property will dictate your repairs and maintenance budget going forward, for example an older home may require more consistent upkeep than a more modern home with newer features and fittings.

The condition of the property will have a big impact on work required for compliance with the Healthy Homes Guarantees Act (discussed in more detail below).

Features and benefits of the property will also have an impact on the level of tenant enquiries such as ensuite bathrooms, fencing, garaging, carparks, views, décor and modern conveniences. The more on offer to prospective tenants the higher the demand and potential rent income.

Asbestos Management

Homes built pre 2000 will most likely require an asbestos management plan in accordance with the Health and Safety at Work (Asbestos) Regulations 2016 where asbestos or asbestos-containing material (ACM) is identified, or is likely to be present.

Having an asbestos management plan will ensure that a PCBU can manage risks in situations where people at the property – such as workers, tenants, clients or other visitors – could be exposed to respirable asbestos fibers (fibers able to be breathed in).

Watch our video on Asbestos Management here: https://www.youtube.com/watch?reload=9&v=9PgUKg9o61g&feature=emb_title

For more information on Asbestos please refer to https://worksafe.govt.nz/topic-and-industry/asbestos/asbestos-management-plans

 

Healthy Homes Guarantee Act

The Healthy Homes Act introduces specific and minimum standards for heating, insulation, ventilation, moisture ingress and drainage, and draught stopping in rental properties.  All private rentals must comply within 90 days of any new or renewed tenancy after 1 July 2021.

Investors should ensure a complete assessment and report is provided as part of their due diligence prior to purchasing a potential rental property to understand any expenses that may be incurred to ensure the property is compliant with rental requirements.

For more information on the standards please refer to https://www.tenancy.govt.nz/healthy-homes/about-the-healthy-homes-standards

 

Smoke Alarms

Working smoke alarms or detectors are compulsory in all rental homes. New smoke alarms must be photoelectric and have a long battery life, or be hard-wired. If you are looking at a potential investment property check to see the locations and number of smoke alarms in the property.

 

Future Developments and Infrastructure

Finally, a good investment property is one that has close links to motorways, and when assessing such properties one should also look at future planning in the area (new shopping centers or public transportation routes may increase rent income).

We regularly attend property investment tours held by independent investment consultants. These tours offer potential investors the chance to look at various types of investment properties and their suitability is discussed as a group, including potential pitfalls and potential for increased return on investment.

 

If you are interested in joining us for a property tour please email Business Development Manager Toni Heath on [email protected]

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