Is Property a Safe Investment?

As highlighted in Auckland over the last several years, property values can climb steadily year-on-year. In this case, prices skyrocketed 85% since 2012. In fact, six other regions in New Zealand have seen double digit increases too. Considering another investment option, such as Kiwisaver, would you expect to see double digit returns? Probably not.

This illustrates the high-highs seen when investing in property. Of course, high-highs are often accompanied by low-lows – though we have yet to see that side in the recent rises in the Auckland region. Calling property investing completely “safe” would be irresponsible. However, many people in New Zealand own investment properties and do see a good return over the long-term. It tends to outpace inflation rates and because values are usually a few hundred thousand dollars or more, even small rises like 3-5% make quite an impact on total value.

Investors earn money in a couple ways when they invest in property. The first is rental income that comes with owning a rental house. The second is the long-term value of the house that an investor sees when they sell. Because an owner cannot “cash-in” the property on a whim, it’s something to approach with a longer-term plan in mind.

In the Short Term

Ultimately, properties have a better chance of being successful for an investor if they are high quality and in good locations. This allows for the best rental income possible. Ideally, this income will cover the mortgage, insurance and other expenses you incur. If you don’t live in the area, of course you may need to factor in hiring a property manager to manage your rental once the house is built and moved to site.

If you choose a cost-effective house to put on your investment section, this is a great way to have a high quality result without the same level of capital. And because Manor Build can complete the build in as little as 6-8 weeks, this gives you a chance to have a renter in there without too much of a wait.

In the Long Term

Many regions around New Zealand are still only seeing small increases in the value of their homes so the prices can still be reasonable to buy. It’s never too late to start. And Manor Build can deliver to nearly any city on the North Island so you don’t have to rely on an out-of-region builder that you may not be familiar with.

As long as you are planning to own the property for more than two years, you won’t face income tax on the capital gains. So, for the person who isn’t a full-time property investor, it’s important to consider it a long term investment. Don’t forget that selling the property comes with additional costs but hopefully by the time you’re considering selling, the values have increased more than enough to cover it.

It Takes Effort

Venturing into property investment will take a time. You want to research section costs in different areas, find out about whether the rental market in that area is hot and select a design for the home that would appeal to renters. Then once you have renters, you’ll need to factor in time to manage the property. It can certainly be a sound investment if you take the right approach though!

Here are some tips on getting started with property investment. If you’re looking to start investing in property, get advice from professionals, or join a property investors’ association to connect with people who have experience in this area. And talk to Manor Build when you have a section that’s ready for a house!