From Property Talk Community Wiki

KEY POINTS TO CONSIDER WHEN BUYING AN INVESTMENT PROPERTY (from material originally supplied by Lisa Dudson[1])

Have a Plan

Many people purchase investment property simply because it goes up in value. Consider which is important: capital growth, cashflow or a combination of the both? What type of property do you want to buy? Do you want a place you can add value to by renovating or making other improvements? Or do you want a property that's new and low maintenance? Ideally you should be looking at holding an investment property for a minimum of 10 years.

Consider Your Financial Position

Before making investments in property, look at your own financial position. Be aware that banks generally take a long term view regarding property investment. They'll consider all aspects of a finance application by focusing on debt levels including your ability to service debt if things change. These changes could include interest rates going up or a reduction in the demand by tenants leading to a fall in rental prices or your income going down.

Do The Numbers

It's important to understand how the numbers stack up. Make sure you are realistic with the rents you expect. Same for expenses like repairs and maintenance, body corporate fees, water, rates, insurance, vacancy periods and interest costs and taxation.

What Type Of Property?

New properties are very attractive for investors, especially those not based in New Zealand. Maintenance costs are low in the first few years and they are usually very easy to rent. Make sure you buy off a quality developer in a good growth area. The building and council regulations in New Zealand are pretty good compared to many other countries. However you still need to show some caution.

What About Location?

Some areas in New Zealand are likely to do better than others. Historical factors that have supported better-than-average price rises are a good local economy which provides good employment prospects, an increasing population which ensures high demand, restrictions on new building which limits supply, plus good local facilities such as parks, schools, shops and restaurants, and easy road access that give the area a pleasant character or environment, making people want to live there. Typically, houses closer to a city have lower cash-flow (rent) return on investment but higher potential for capital growth. The suburbs or smaller cities tend to be the opposite.

Dealing With Tenants

New Zealand has very comprehensive tenancy law which is strongly enforced. You should definitely consider using a professional property manager. Generally, properties in New Zealand are let unfurnished.

Get Good Advice

The most important thing to do when buying property for any reason is to get good advice. And more importantly get this advice at the start, not half way through or at the end. Time and money spent sorting out problems for investors who get advice towards the end of the process which can be significant.

Someone with a high income and thinking about doing something for the long term should find that investing in property can be a great way to create long-term wealth. However, it is essential to get good advice.