Property Investment
3 min read
Author: Andrew Nicol
Founder, 20+ Years' Experience Investing In Property, Author & Host
You’ve found a property that looks like a good investment. The price seems fair, the rent stacks up, and the suburb has plenty going for it.
But some properties that look great on paper turn out to be poor investments.
The reasons are often small and easy to miss.
For example, we’ve got 2 teams:
Most properties that developers send the property team to consider listing don’t make it past the first look.
2 out of 3 get turned down.
And it’s because of some of these dealbreakers that you can look out for next time you invest 👇
The team at Opes Property were looking at a development of 3-bedroom properties.
They were in an Auckland suburb that has above-average rental returns.
The properties looked like a good investment and were about to get the thumbs up.
But before I recommend a property, my standard process is to ask a property manager how easy it’ll be to rent the property out.
In this case, the property managers found there were over 70 other 3-bed rentals looking for tenants nearby.
That competition can make it hard for you to find a tenant.
In another example, the investment adviser team were running the numbers on a house in Riverhead (West Auckland). This is a suburb where there’s a lot of infrastructure expected in the next decade.
They liked the price and the location looked good too.
But when you look at the Stats NZ numbers, there aren’t that many renters out there.
Only 16.6% of households rent. That compares to 40.5% of households across all of Auckland.
That’s according to the latest census.
On paper, plenty of investors would want this property. But the data suggests you might struggle to find a tenant.
What you can do: Check how many renters live in a suburb before you buy.
The data is hard to dig out of Stats NZ, so I built Area Analyser. It puts it all in one place, and it’s free to use.
If the share of renters is well below the Auckland average, you could struggle to find a tenant.
Sometimes you can look at all of the data in the world, but you also need to get on the ground. Your eyes can see what a spreadsheet can’t.
The property team rejected another development because there wasn’t enough parking.
There were double yellow lines along both sides of the road.
And the properties didn't have enough off-street parking for future tenants.
The tenants would have to park down a side street. That would eventually get clogged.
That’ll make it harder to find a tenant, and then get them to stay.
It reminds me of another house that I was looking at in Christchurch. It was a single-level home with a garage.
The numbers looked almost perfect on paper.
But then on a drive-by, the Opes Property team saw rubbish scattered around the neighbours’ yards.
Good data. Bad drive-by.
What you can do: Before you buy, it’s worth doing a drive-by of the area at different times of day. You can see issues a spreadsheet doesn’t.
Then there was the time I was analysing some higher-end properties in Christchurch.
They had a larger-than-average floor plan. The development was close to Hagley Park (the main park in the middle of Christchurch).
They were in a good school zone. The developer had a good reputation.
The developer originally wanted $850,000. After negotiating, the property team were willing to list the property for $50,000 less.
But even with that price drop, I wouldn’t recommend it to client. There wasn’t enough rental income to justify the price.
My analysis showed that you’d need to get the property for around $750,000 to get a high enough rental return.
So even though they were nice houses, I couldn’t recommend them as an investment at that price.
What you can do: Run the cashflow before you buy. This can be difficult, so I built Opes+ so you can do it for free.
Whether you invest through Opes or on your own, you can run these checks yourself.
Look at the renters and the competition, do a drive-by at different times of day, and run the cashflow.
P.S. If you want help investing, you can always book a free portfolio planning session with an Opes Partners financial adviser.
Founder, 20+ Years' Experience Investing In Property, Author & Host
Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.
This article is for your general information. It’s not financial advice. See here for details about our Financial Advice Provider Disclosure. So Opes isn’t telling you what to do with your own money.
We’ve made every effort to make sure the information is accurate. But we occasionally get the odd fact wrong. Make sure you do your own research or talk to a financial adviser before making any investment decisions.
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