(This article is a summary of the blog originally written by Nick Gentle from iFindProperty)
Investing outside of Auckland - a golden opportunity and exciting yields? Or a bad decision that you should stay away from?
Most Auckland residents invest outside the big smoke because of lower prices and higher yields and the ability to buy house and land packages.
But it's not as easy as it seems and things might go south if you invest your coin in the wrong property.
Here are our top 5 tips for investing outside of Auckland:
#1 Be very clear on what outcome you want and invest accordingly
Knowing exactly what you want from your rental property, and by when, will help you make the best decisions. Buyers who get this do well and the ones who don't end up spending a lot of time and money for no good reason.
Whether your goal is to have retirement capital 30 years from now or have 50K in passive income in 15 years, you need to be aware of the fact that every goal requires a different strategy.
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#2 Use net yields to compare different areas on cash flow
Gross yield is the cash flow before expenses, whereas net yield is cash flow after expenses. When homes are advertised with a gross yield, you might get tempted to buy them without understanding the cash flow structure properly.
That's why it's recommended that you consider 'net yield' instead. To calculate net yield, take annual rent and subtract fixed costs (rates, insurance, maintenance and vacancies), then divide it by your total price (purchase plus renovation).
#3 Remember that in non-property investment circles, the yield is a measure of risk
Simply put, be careful of small towns that don't have many jobs. Don't get attracted by a cheap property with a high yield. If you see one, investigate why the price is so cheap. It's usually because of low population, poor conditions, lengthy commute to a bigger job market, or few local jobs.
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#4 Local knowledge will save your skin
You don't want to invest hundreds of thousands of dollars in an area you know nothing about. You must know the town and understand what drives its local economy.
You should also know what streets are good or bad, where houses see frequent tenant turnover, and where people stay for several years.
Use a local property finder or buyers’ agent to get the best deals and avoid the lemons.
#5 Use a property manager
You can't manage your remote properties effectively if you don’t know the market, aren’t familiar with the regulations, do not have local tradespeople as contacts, and cannot visit to address problems or enforce the rules.
That's when property managers come into play. They're well trained and manage properties every day. In short, they know what they're doing, so let them handle it.
It has never been easier to invest in markets where you don't live.
Apart from these tips, there's a lot more you need to know before you invest in rental property.
We have assisted a lot of our investors in buying a rental property. Most of our clients are out of town or even expat investors buying from overseas.
If you still have questions or need any help, feel free to get in touch now.
PS: Please note that this information is meant for educational purposes, not to provide specific legal advice. It is highly recommended to consult with independent legal advice before buying a house.