Regions great option for savvy investors

Houses1

Posted 8 months ago by Craig Pope

Keen to buy a rental property but feeling squeezed by house prices? Have you thought about buying outside of Wellington?

Investors have traditionally looked to suburbs like Tawa, and further north in Kapiti or Horowhenua, to buy rental properties—but as more first-home buyers shift into those areas there are fewer opportunities for investors. According to QV, the average price for a home in the Wellington area is $639,112 meaning investors will need a deposit of at least $223,000—or 35 per cent.

Some smart investors are looking at the potential other towns and cities around New Zealand can offer.  If done right, a rental in the regions can offer great returns. 

Area

Average House Price (June 2018)

35% Deposit Required

Horowhenua

$319,022

$111,657

Taupo

$475,360

$166,375

Masterton

$347,468

$121,613

Dunedin City

$409,898

$143,464

Invercargill

$265,151

$92,802

 

I’m a first home buyer struggling to get on the ladder—should I invest elsewhere, instead of buying a home locally?

Unfortunately, no. It’s easier for people who already own property to invest—you would need a 35% deposit, or to live in the house for six months before renting it out—a difficult scenario if it’s your first home or if it's too far away from where you currently live and work.

What homework do I need to do?

It can be hard to know what a town or city is really like if you only spend a short amount of time there—so, do some groundwork. 

  • Is the town/region economically stable? Does it depend on one industry or does it have the potential to grow?

  • What are the demographics? Are there more students, families, retirees or professionals?  These people will be your tenants.

  • Is it connected? Is it easy to get to, are the roads good?

  • What’s the employment rate? Will you be able to attract the tenants you need to cover your costs?

  • Are there any large projects happening? Think major roads or business developments—projects like this are a good indicator of future prospects.

 Once you’ve picked a town, consider your property search against the following factors:

  • Location

  • Length of time on the market

  • Local sales history—median prices, capital growth rates

  • Estimated market value

  • Proximity to schools, transport, shops

  • Potential for financial gains

Generally, banks don’t impose restrictions on investing away from home, as long as you meet lending criteria.

If you’re an investor looking to spread your wings and need some help, then give us a call today 0800 517 000.

 

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