The balancing act and the game of investing

Posted by Andrew Nicol on 10/04/17

“You have to be in to win” springs to mind when discussing anything to do with property investment. However, it’s not about getting into the market that will help you to achieve your goals, it’s about staying in. This means bearing both the good and the bad that comes with the territory. To get it right involves a finely tuned recipe and a reliable support base around you. Here are a few tips that will help you to succeed.

No one wants to be the first or last to the party

Buying too early in an area can be risky when there are no signs to indicate that it may one day take off. However, by the same token buying in an area once it has already had its boom isn’t ideal either as much of what investors might hope for in quick growth will have already been taken. It’s a fine balance in timing that often takes foresight and courage. Look for areas that are likely to have fighter pressure on population or the surrounding services with more people coming to live in that area.

Look at the type of people living in the area, from both an owner-occupier and a tenant point of view. Are the properties well maintained and are the inhabitants' house proud? Nothing slows property growth more than undesirable neighbours and occupants.

Schools and amenities should also be carefully considered. Are the local schools well regarded? What is the proximity to main transport routes? Remember public transport is often very important to tenants. With the increasing cafe culture of New Zealand look at what this scene is like close to where you are looking to invest.

Beware of the diamond in the rough

Everyone loves the grand idea of buying a house that is purchased undervalue with the intention to add value. All too often this is just that, an idea. Very rarely in our experience have we seen this idea come to fruition. The ones who threaten this type of activity are normally in a trade with the worst offenders being builders. We recommend buying quality and low maintenance. The largest gains are made in time not in effort, as appealing as it looks.

Instead, buy a quality dwelling that will not only stand the test of time but also stand up to tenants. Remember, tenants are generally a lot harder on houses than owners in their own home. We generally only recommend clients buy a property with warranties and guarantees in place. This provides protection against the unexpected and means budgeting is possible. After all, how can you formulate a budget if you aren’t sure whether the roof will blow out this winter or next?

The balancing act

Anyone can find a piece of land in the perfect location with a falling down house on it. Anyone can also find a newly built quality property in a below par area that will likely stand the test of time and tenants. The trick is to bring both of these factors together into a property that is a combination of the two. We are trying to find what we call the ideal compromise, as investing always comes with compromise. What are you as an investor willing to give up and what do you definitely want? An investment property without compromise is not an ideal investment property. It sounds more like a home you would buy to live in. Remember, they are two very different things that must be kept as that.

Who mentioned money?

To further the act, we add price into the mix. We need a great location and dwelling for a price that is not only affordable but adds up in relation to the rental return from the property. This leads us to start researching rental prices in the area and consider what the trends are showing. Are there any rental ceilings in the market? -meaning no matter how good the house, the tenancy market will only pay a certain rate. This too is a fine balance, as an investment where only the financial aspect is considered will likely bring problems along the way as well.

Investing is a balancing act between location, dwelling, and finance (i.e. mortgages). A finely tuned investment portfolio sees all of the above in harmony. Simply put, it requires a quality property in a great location purchased for a great value price. Some say this is an act better left to the experts.