Property investing is a passion and a hobby for Alice and Caleb Pearson – serial renovators and winners of The Block NZ 2013. But this fun couple means business when it comes to preparing for any new property project. Read Alice and Caleb's five top tips when investing on a new property.
If you're like us, we genuinely enjoy reading the property section in the paper or scrolling through online listings, meeting and talking with agents and dropping in to open homes.
At one open home we walked into the lounge to find a shirtless male tenant laying across a bed and smoking, who said we had to keep the door closed because of four cats that weren’t allowed outside. We counted eight litter boxes, although from the smell, we could tell they weren’t the only places in the house these cats had relieved themselves. But this bungalow had great bones! From wooden panelling in the kitchen to ceiling mouldings in the lounge, stained glass windows and bay windows - it was beautiful and full of character. This house needed to be renovated and restored, and that’s exactly what we did. It became our third property project.
But before falling for a property it’s important to take time to create a strategy and have a plan to set yourself up for a win. Property investment is not for everyone. It’s no guarantee of instant wealth overnight or an answer to financial issues. So here’s our five top tips to set yourself up to buy well.
1. Know why
Before you commit yourself to a mortgage and the responsibilities that come with owning an investment property, take time to understand why you’re doing it. Is it a stepping stone to having your dream home in the future, to generate wealth, create cashflow or help you retire early?
As with many areas of life, the clearer the vision or goal, the easier it is to know if you’re heading in the right direction.
Taking time to think about ‘why’ you’re investing will help you steer your decisions and investment strategy towards achieving your goals.
2. Know your position
So many times we’ve heard someone say they can’t afford to buy a house, then find out they haven’t talked with a bank or mortgage broker. While not everyone’s in a position to buy, I think many people would be surprised at their options. Questions to ask your bank or broker could include: What can I commit to or afford right now? How much spare income could I have to top up a mortgage? What will my bank lend me?
While you may not be able to buy a property right now, knowing your position will allow you to learn what’s required and develop a plan to get there.
3. Know your options
When it comes to investments, there are many options available: property, shares, businesses and more. If you’re enrolled in KiwiSaver you’re already investing. Each type of investment comes with different levels of risk and return, which can be chosen to suit you as an individual and your attitude towards risk. We obviously share that typical Kiwi love for property, and I’m not saying that’s a bad thing. But I’m an advocate for growing your knowledge and understanding before passing over your money or committing to a 30-year mortgage.
Explore what your options are – you have choices. Take time to know what these are, be informed.
If you can’t afford a property now, what can you still do? There’s always something. Whether it be putting that $100 weekly disposable income into shares or savings instead of spending it, or using your time to research and learn. Get into the habit now.
4. Do your due diligence
This isn’t by any means new advice – any bank, mortgage broker, agent or property coach would all share the same point. Before you go unconditional on a property, do your due diligence.
Simply put, due diligence is about taking time to understand the ins and outs of your investment so you’re aware of what you’re purchasing.
This commonly includes getting a builder’s report, valuation, loan approval, LIM report and title check. For us, due diligence starts well before even looking at a house. It could be researching the market to find trends and underperforming locations or researching specific areas to find good value buys. Due diligence and research is all about making wise and informed decisions. It’s knowing the outcomes, the risks and benefits before you commit to that decision.
5. Don’t rush – but act quickly
All of these tips so far have been about taking time to lay the foundation before making an investment. Personally, we’re conservative and want to be confident of making a good decision before jumping all in.
By taking time to form your strategy, assess your financial position and complete due diligence in the locations you’re focused on, when opportunities arise you’ll be in a position to act quickly.
This is different than rushing a decision. Instead, you’ll have confidence in the decisions you make.
At any stage of your home buying journey, Kiwibank’s home loan experts are available to give you obligation-free advice and guide you through the process right to the end. For more information on buying a house visit Kiwibank’s five steps to buying your first home – whether you’re ready right now or it’s a little while away.