Property Management - Rent Exchange

Property Management

On the following pages you will find our Property Management Newsletter.

on’t hesitate to contact Debbie Harrison who can ably assist you with any Property Management issues you may have or if you have any questions about anything in the Newsletter or property management in general Email: debbie.harrison@ljhooker.co.nz Phone: 021 303 864

Government abandons scheme to fill ghost homes

The government has moved its focus away from filling vacant properties after a $500,000 investigation and trial.

Vacant properties, also known as ghost homes, are often looked at as a solution for easing the pressure on the rental market. However, the results of a trial in Hamilton did not find favourable results.

The government turned to community organisation Wise Group to investigate the number of ghost homes, why they were empty and to run a trial to try fill them with tenants. Its work began back in March 2021 and it produced a national scheme following its investigation.

Results from the investigation found the process of working with owners of empty properties to find tenants was too complex, and the number of true ghost homes was found to be relatively small.

The community organisation drew on 2018 Census data and found there were nearly 95,000 empty dwellings across New Zealand. However, a survey of empty homes owners suggested only 10 percent of those properties were intentionally kept vacant.

When breaking down the numbers, the vast majority of empty homes were holiday homes, second homes, or were vacant rental properties or under renovation. “Long-term vacant dwellings make up only a proportion of unoccupied dwellings,” a Ministry of Housing and Urban Development spokesperson said. The spokesman said the study indicated there were no “low-hanging fruit” to make empty homes available as rental properties.

Despite the Ministry’s decision, Wise Group board chair Julie Nelson believes any programme to increase housing availability is worth the investment.

“We know that innovation projects of this nature need time to become well-established and achieve desired returns,” Nelson said.

The ministry spokesperson said the scheme was still worthwhile to better understand the extent of, and reason for, properties being kept vacant.

“The project gave us a greater understanding of the barriers to find suitable empty homes for housing market renewal and the support and solutions needed to bring them back in to the housing supply, within the New Zealand context.”

The trial in Hamilton focused on eight vacant properties, and resulted in five being returned to the market.

“It is generally accepted globally that a small percentage of homes will naturally, due to a range of factors, be unoccupied at any one point in time.”

Investing in property is a dream for many. It is an investment that you physically own, and like former US President Franklin D. Roosevelt said: “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world”.

When done right, a property investment can set you up with a comfortable nest egg to support you and your family through life’s adventures, and into retirement. However, like every investment, there are risks involved, especially if you do not know what to look out for.

To get the best return on your investment, there are several common mistakes you may want to avoid. Here is some advice to help you avoid those mistakes.

Have a solid plan Just like all great things in life, a plan is what helps you get ahead. One of the biggest mistakes people make when investing in property is failing to set a specific goal from the beginning. It is important that before you invest in a property you know how it will generate an income.

From the beginning, consider your property investment strategy before you get caught up in the property buying frenzy. A few question you may want to consider include: What type of house am I looking for? Where is my target location? Do I want to rent my property or flip properties for profit? What will happen if the market sours?

While the answers to these questions are just the beginning, your plan should be full of details. This is a good starting point for your planning process.

Put your mind over emotions Many of us are guilty of thinking with their heart and not their head, and when it comes to an investment you need to be analytical with your decisions.

Decisions made using the heart strings play a significant role in investment mistakes. It is important that you approach your investment property as a business and put your emotions to one side when making critical decisions. This means that you should not fall in love with your property so much that you begin looking at it from the viewpoint of a homeowner rather than a property manager. Being analytical and objective is the name of the game when buying an investment property. If you see a property that takes your fancy, sleep on it and gain more insight into the capital growth and rental yield prior to making any rash decisions.

Research, research, research Finding the right investment property is not something that is going to happen overnight, it can be tedious work. At times, it may be tempting to skip all the research and go straight to purchasing, but that would be a vital mistake. If you do not take the time to do your research first, you can end up with a property that fails to give you the return you want.

Some helpful research tips for property investing include:

Avoid basing important decisions off the recommendation of friends and family. While well-meaning, those without expertise in the field can hinder rather than help your investment plan.

Do your homework on the local area: what are the market trends? Demographic? Demand and supply?

What’s the condition of the property? Will it require major renovations or maintenance?

Does it meet the healthy homes standards?

Does the property align with your target tenants wants and needs? For example, does it have the features and amenities that tenants want in that location?

Doing your research will ensure you are wellinformed about the property and can make better real estate investment decisions - avoiding costly mistakes.

Do the maths It is important that you are familiar with the numbers before you commit to an investment property. You need to make sure you are on top of your mortgage repayments, as well as other costs, such as maintenance, rates and insurances.

To make sure you are prepared for any additional costs, it is a good idea to create a maximum limit and to set aside an emergency fund for any unexpected costs or issues that crop up from managing a property.

On top of this, always make sure that your investment is financially sound. Make sure you have enough money stowed away to put down a decent property deposit and have enough to pay back those monthly loan repayments. A good rule of thumb is to have 2-4 months of rental income saved up as a financial buffer to avoid being in a constant state of financial stress.

Don’t settle for the wrong property With a number of different properties to pick from, it is easy for first-time investors to jump on the first property that becomes available. A word of advice? Hold your horses. If you want to avoid buying the wrong property then keep an eye out for the following:

Is it an investment-grade property?

Scarcity: investing in a new build property within a new residential estate may not have the investment potential as an older home. What is the land value? What is the past sales history of the property? Consider the property’s proximity to shopping centre, hospitals, schools, arterial roads and so forth.

When in doubt, always consult with a property manager for professional advice to avoid investment mistakes.

Think long-term Real estate needs time to grow in value. The longer you own the property, the high your return will be when it is time to sell. If you are hoping to get a good return on your investment, then avoid making the mistake of investing short-term. Sure, it may provide investors with a higher rate of returns, but it also comes with a higher risk. Remember, as a first-time investor, slow and steady wins the race.

Consider your tenants If you have decided to have an investment property you can rent, keep your potential tenants in mind. Many first-time investors only take in account their needs when purchasing a property, and fail to notice what will and won’t work for potential tenants who may call your investment property their home.

Try to match your investment property with the types of tenants most likely to rent in that area. For example, families will want a safe neighbourhood and proximity to good schools. Singles or seniors may want access to public transport and shopping complexes. If your property is to be a vacation rental, make sure it is nearby local attractions.

The information contained in this publication is general in nature and is not intended to be personalised real estate advice. Before making any decisions, you should consult a legal or professional advisor. LJ Hooker New Zealand Ltd believes the information in this publication is correct, and it has reasonable grounds for any opinion or recommendation contained in this publication on the date of this publication. Nothing in this publication is, or should be taken as, an offer, invitation or recommendation. LJ Hooker New Zealand Ltd accepts no responsibility for any loss caused as a result of any person relying on any information in this publication. This publication is for the use of persons in New Zealand only. Copyright in this publication is owned by LJ Hooker New Zealand Ltd. You must not reproduce or distribute content from this publication or any part of it without prior permission.