Owning and managing a rental property can be very rewarding; emotionally and financially. There's plenty of opportunity in our present market where 1/3 of people in New Zealand rent, rather than own, their own home.
There are very important things to consider however, before you go ahead with such a significant purchase. Investing in property is profitable in the long term, but there may be little or no profit in the short term; especially if you sell within two years, thereby having to pay a capital gains tax.
As someone who enjoys owning property I also happen to love running. I think the two have some things in common - in particular, owning a rental is akin to running a long distance race (as opposed to a short sprint).
ON YOUR MARKS, GET SET:
Before you make that purchase, plan and prepare well!
Know NZ’s tenancy regulations and what legislation may be around the corner, eg. insulation will be compulsory in all rentals from 1 July 2019.
Be aware of potential costs to renovate and maintain the property.
Know your rights and responsibilities as a landlord and know the tenant’s rights and responsibilities.
Be aware that if you buy a Unit Title property you are required to follow the body corporate rules or changes.
Consider how much of your time will be sucked up getting tenants in and managing them as well as the property.
Ask yourself if you want to be fully hands on with this rental project? Getting a property manager you can trust, especially when you start out new to the rental industry, can save you a lot of hassle and heartache. A good property manager like Dominion Property Management, have the knowledge, time, resources and experience that counts, including the mediation skills – an investment that can far outweigh what you pay!
"Owning a rental is akin to running a long distance race as opposed to a short sprint."
GO:
Start out with a tidy, safe home and property that’s ready for the tenant to move into from day one. If it’s a house you’d like to live in then it will be much easier to attract and keep tenants, and they’re more likely to treat you and your property with respect.
Regular maintenance – keep up with this for the same reasons, and so as to avoid extensive costs/devaluation of your valuable asset further down the track.
Make sure you have the right insurance, and you understand the requirements of your policy.
Be aware of the market – this will enable you to charge the ideal rent and bond (a good property manager excels here).
Set up a bank account specifically for rental payments.
Screen tenants carefully – Interview potential tenants and check references and credit. Good tenants are worth their weight in gold. Unreliable, irresponsible ones cost you gold (and turn your hair grey)!
Contract - Have a clear tenancy contract that both parties understand and sign, and complete a bond lodgement form.
Set firm tenancy ground rules - Stick to these rules, e.g. when rental should be paid. Treat tenants with respect, but cutting them lots of slack in the beginning means it’s likely you’ll be milked for it throughout their tenancy.
Ensure the tenant has your contact details so you can stay in touch.
Conduct an initial property inspection together with your new tenant and visit your property regularly – damage or degeneration with rentals can happen very quickly, which can be expensive and unexpected.
Be aware the law requires that if you're managing the property yourself and are out of the country for more than 21 consecutive days, you must appoint an agent who can act on your behalf.
Enjoy the rewards.
And if you need any help, give us a call!