Buying a home and an investment property are two very different things. That’s because home owners buy with their hearts and investors with their heads.
Numbers versus enamour
Property investment` is all about the numbers. Don’t make investment choices based on décor, or the desire to buy a mirror image of your own home.
What really matters with investment property for sale is rental yields. That’s rent versus price (expressed as a percentage). If you’re earning 1 per cent on your money it may not be worth the hassle.
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Better homes in cheaper areas
A $900,000 home is 50 per cent more expensive than a $600,000 home, but it probably won’t get a 50 per cent higher rental price.
Often simpler cheaper homes stack up better financially as rental properties. Experienced investors look for low maintenance homes with desirable features for tenants such as off road parking and access to public transport.
Quick and easy improvements
The most profitable investment properties are often those that only need a simple makeover/touch up rather than a full-blown renovation.
If you’re tempted to replace the kitchen and bathroom consider instead whether it’s possible to resurface or replace the bench and paint rather than replace. If you do have to upgrade the best “investment” is often bog standard but modern options from DIY stores .
Look for hardwearing. Whilst laminate flooring is great in an owner occupied home, for example, solid sheet vinyl flooring ensures you have a fully sealed floor in case the tenants fail to tell you that they’ve had a “flood” and the floorboards below rot.
Grass not gardens
Unlike owner occupiers tenants don’t have a good record of looking after gardens in their rental properties. A beautiful investment property garden is one with a few strategic plantings of fashionable plants such as grasses, flaxes, and an easy-to-mow lawn.
Who pays the mortgage?
Property investment is a long term game, says Andrew Bruce, president of the Auckland Property Investors Association. Selling for a few hundred grand profit is nice. It’s the rent, however, that is paying the mortgage, rates, insurance, maintenance and other costs. If there is insufficient rent then the “holding costs” will be too high.
Do your own research
“Do your own homework on what rent you believe you’ll be able to achieve and what the property is worth,” says Bruce.
Public records available on OneRoof will also tell you a lot about the property such as its floor area, living areas, zoning, land area, construction, type of title and even sunlight hours.
Adding value
When you buy your own home you want to stamp your personality on it. With investment property for sale you’re looking for ways to add value and increase rent. A favourite with investors is finding ways to create extra bedrooms. Sometimes this is as simple as closing off an archway to a dining room. Common as well when house hunting is to look for properties where the kitchen can be turned into a bedroom and the cooking facilities situated in an open-plan lounge.
There will always be some factors that are similar to buying your own home. For example tenants are just as concerned as owners about being on the right side of the tracks. They care about school zones and commute times. The average household income can make a huge difference as well.