Have you recently returned to New Zealand from the UK – or perhaps, you’re planning to?
Next to owning your own home, investing in property has long been an important part of the ‘Kiwi dream’. So, in the third and final part of our series on Looking for a home in New Zealand, we’d like to share some key things to know about property investing.
Remember, we’re here to help: While our team at Pension Transfers don’t provide advice on mortgages, property investment or renting, we have long-standing partnerships with experts in these areas who can help you make informed decisions along the way. And of course, if you’re considering a UK pension transfer to New Zealand, get in touch: we have over 20 years’ experience in assisting returning New Zealanders and UK ex-pats with this complex and often lengthy process.
1. Educate yourself on the market
Just like we mentioned in our First-Home Buying Guide here, before making a move, it’s important to get familiar with the property market – including current house prices and rental yields. Especially if you’ve been living overseas for a while, you may find that things have changed significantly since you left, with property prices hitting record highs in all regions.
So, start by catching up with the latest residential property data: the Real Estate Institute of New Zealand (REINZ) publishes a comprehensive report each month. Also, QV and CoreLogic are a good source of insights.
2. What’s your goal?
Are you investing for capital gains or cash flow? This is one of the key questions you’ll need to ask yourself before kicking off your journey into property investing.
There are pros and cons to both strategies, and the choice will depend entirely on your circumstances and goals. That’s why we recommend talking to a property investment adviser, who can help you understand what’s involved, and how it relates to your financial situation and ‘risk tolerance’.
Also, keep in mind that there are tax implications that can affect the profitability of your investment strategy. Namely, according to the latest bright-line property rules, generally anyone who sells their investment property within 10 years of buying will have to pay income tax on any profit made on the sale. Visit the IRD website to learn more, or contact a tax specialist.
3. How are you going to fund your purchase?
Not sure what your target price range might be? Unless you’re in the position to pay cash in full (e.g., following the sale of another property), the answer to this question comes down to how much you can borrow.
Borrowing money for a rental property is different than taking out a mortgage for an owner-occupied home. When assessing a property investor’s borrowing capacity, lenders usually consider factors like the potential rental income and apply specific lending criteria, including loan-to-value restrictions.
Once again, we recommend talking to an expert. If you’re looking for a mortgage adviser, we have experienced mortgage specialists in our network who can help you identify which lender (or lenders) may be appropriate for your needs, and what loan options are available to suit your investment strategy.
4. Finding the right investment property
Once you have a clearer idea of your investment strategy and the path forward, it’s time to choose your investment property. Not all properties make good investments for many reasons, which we’ll not examine in this context.
Location, demographics, surrounding infrastructure and development are all key factors to consider. And of course, if you’re looking at investing in a rental, make sure you check how much it was rented for in the past, if there were any vacancy periods, how long the property was vacant for, and why.
Plus, don’t forget to work closely with a lawyer and an accountant who understand rental property. There’s a lot to unpack, so having the right experts in your ‘support team’ is all-the-more crucial.
5. Do your due diligence
From researching properties and attending open homes through to getting a builder’s report, and asking a lawyer to check official documents about the property (e.g., LIM report, title search, etc.), due diligence is key to real estate investing.
For more on this, read points #4, #5, #6 and #7 in our First-Home Buying Guide.
6. How much work is involved?
Before making an offer, make sure you know how much work is involved. Is the property reasonably low maintenance? Will you have time and capacity to manage the rental – finding and managing tenants, as well as dealing with maintenance issues? Or would you pay property manager to take care of these tasks on your behalf?
Besides maintenance and property management, there are other potential ongoing costs to consider, like insurance, rates, body corporate fees (if applicable), and accountants. Lastly, while most tenants live up to their obligations, it’s a good idea to factor into your strategy the possibility of issues arising, which may include damage, late payments, or unexpected periods of vacancy.
Like to make New Zealand ‘home’?
Buying an investment property can be a complex affair, but when planned carefully and with a solid support team on your side, it can also be a great way to get ahead financially.
If you need help with your mortgage, please don't hesitate to contact our experienced mortgage adviser partners, Loan Market Capital & Coast. They specialise in making the mortgage application process as easy as possible.
And if you’re moving (or have moved) to New Zealand from the UK, keep us in mind: we’re UK Pension Transfer specialist. Click here to learn why early planning is key when pondering a UK Pension transfer, or give us a call on 0800 UK 11 NZ if you have any questions.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance. Past fund performance is no guarantee of future returns.