buying a rental property
It sounds like an easy way to build up your personal wealth but, good rental properties can be hard to come by.
To find the right rental property you will have to spend a fair amount of time viewing several properties before making an offer on the one that ticks all the boxes.
There are a few factors to consider such as:
Residential Property
Commercial Property
The vacancy rate in the area is it high or low, lower the better
Is the property in an area of growth, near schools, shopping amenities, medical centre’s this all adds up to the capital gains and rent potential on the investment property.
The condition of the property, will you have to spend extra to make a good rental return
Yield is important
Positive & Negatively Geared Property
We all want a positively geared property, one that has a positive yield – this means the rent will cover your mortgage repayments and give you a little bit extra.
The reality, is that a rental property can be negatively geared, meaning the income from the rent does not cover the full mortgage repayments. You as the investor are topping up the mortgage payments.
This is not ideal if you are wanting to grow your rental portfolio as the lenders are less willing to lend against them.
In some instances, you may want to own a negatively geared property especially if you are expecting to make a capital gain when you sell the property. The gain will then be used to make up the shortfall on the property. For example, if you are buying a property for a family member to live in and you are subsidizing their rent by paying the short fall.
A rental property is a big step and as such you should be prepared to put in the hard yards.
Once you have your rental property consider how you will manage your property:
Do you want to manage the property yourself? Or
Engage a Property Manager – there is an additional cost
Allsure Financial Solutions has access to several lenders both bank and alternate lenders to find a solution to meet your rental property goals and can recommend mortgage loan structures to compliment your goal. Redraw, offset and interest only loans can be effectively used to manage your rental property loan. It is recommended to have minimal to no personal debt and to keep your rental property debt to a minimum.
We always recommend you seek legal advice including advice from your accountant when considering rental property loans.
Get in touch to discuss your personal rental property loan requirements.
I have had the pleasure of dealing with Sean and Elaine for more than five years now with a number of different insurance products - and more recently Kiwisaver. They have made the whole insurance application/claims processes so much (!!) easier than dealing direct with insurance companies and I thoroughly recommend Allsure to anyone wanting an experienced, friendly company to handle their insurance needs.