How to make your rental property an excellent investment

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If you’re looking to invest in rental property or become a landlord for the first time, there are many things to consider.

So we sat down with Harcourts Highland Group CEO Kelvin Collins to glean his advice.

Hi Kelvin. What trends are we seeing in the rental property market at the moment?

We’re seeing a lot of people choosing to rent as a quick and easy alternative to buying. House prices are on the up across New Zealand which is putting some property out of reach for buyers: they choose to rent whilst they save, which is increasing the demand for a wide range of rental accommodation.

 

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For potential investors, what are the benefits of renting out a property?

Good question. Renting sometimes gets a bad rap but the good aspects definitely outweigh the bad. The supplementary income you can generate is a huge attraction and the main stream is your rental return.

Rental property also allows for considerable capital gain and I see it as one of the soundest investments you can make. In a secure market like ours you’re likely to be much better off when you come to sell.

Rental property is rewarding in other ways, too. Whether you’re looking for long-term residents or holiday-makers, it’s enjoyable and satisfying to offer a great home and build a strong relationship with your tenants or visitors.

 

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What’s the number one piece of advice you’d give to first-time landlords?

I’d urge first-time landlords to familiarise themselves with the Residential Tenancy Act. There’s a lot of fine print surrounding residential tenancies and you can get in hot water if you don’t comply.

For example, you need to think about insulation, smoke alarms, ventilation, overcrowding, sanitation, drainage, heating and notice periods — to name just a few! And did you know you need to appoint a New Zealand-based landlord if you’re leaving the country for 21 days? You name it, there’s a compliance to be aware of.

I’d suggest reaching out to a property management agency for this reason alone. They know the laws like the back of their hand and will be able to make sure you’re sticking to the book.

 

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Do I have to use a real estate agency to rent my property?

The simple answer is no: you can legally lease your property privately, without going through an agency. However, there tends to be a greater risk involved.

Agents can ensure both sides understand the agreement and can handle deposits and rental income through trust accounts. They’re on hand to help with emergencies and maintenance and are able to run daily rent checks. And they have direct access to a huge network of tenants.

In short, an agency’s robust processes tend to make things safer, easier and more streamlined for both landlords and tenants.

 

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What other advice do you have for landlords and property investors?

I recommend thoroughly researching your local area, nearby rental property and the current market. The more you know, the better position you’ll be in to begin managing your rental property.

You should decide on the length of tenancy you’ll offer according to the amount of administration, support and maintenance you can provide. Long-term rentals provide a level of security that is hard to beat but if you own a luxury property it might be better suited as a short-term holiday offering.

Once you’re at the stage of finding tenants, don’t jump at the first people you hear back from. In most markets there are more tenants than there are rental properties, and you want to make sure you find a good fit.

That’s another useful aspect of using an agency — they have a rigorous screening process for tenants. They assess the income and credit rating of potential tenants and can acquire references: you won’t waste time looking at unsuitable applicants and you’ll minimise any potential problems.

And finally, enjoy your investment. You have the opportunity to create a reliable and consistent source of income and, managed well, it can be very rewarding and enjoyable.

Thanks Kelvin!

 

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We’re always on hand to help prospective or current landlords get the most from their rental property. Get in touch if you’d like to know more.

Here are some useful links:

The New Zealand Residential Tenancies Act 1986.

The Real Estate Institute of New Zealand.

The Department of Building and Housing New Zealand (for handling tenancy disputes).